Escape from Poverty Traps: Three Essays on the Effects of Policy Intervention on Agricultural Productivity and Welfare among the Rural Poor

I present three essays on how agricultural policies affect technology adoption among poor, rural households in developing countries, and, in turn, how such policies can affect household welfare.;In Essay 1, I examine technology, default and index insurance choice. I employ a dynamic, stochastic, heterogeneous agent model where farm households have access to contingent credit or credit-linked insurance, and make choices regarding technology and loan repayment in each period. My approach is novel as insurance is modeled as a meso-level product, where the bank is indemnified before any payouts are distributed to its borrowers. Thus, the model takes into account both supply- and demand-side concerns, showing the possibilities of a trickle-down effect when insurance contracts are sold not to individual households, but instead to risk aggregators for whom basis risk is lower. Results show that insurance can have a positive effect on technology uptake, while letting the lender lay first claim on indemnities lowers default. Additionally, bundled credit-insurance contracts allow for higher rates of return for banks, thus increasing sustainability of the credit market in rural areas.;In Essay 2, I examine food price spikes and food insecurity, particularly among subsistence households who are vulnerable to price increases for staple goods. I begin with a review of the recent food security crises, presenting a taxonomy of policy response for 124 countries. Because long-term development projects are a favorable response, I focus on policies of market integration through infrastructure buildup. I present a model that captures the welfare effects of transportation constraints for poor farmers in a village economy; after numerically solving for an economy-wide equilibrium, I vary the transportation constraint to compare outcomes under different levels of infrastructure development. I find increased rates of food insecurity and higher, more volatile village prices when transportation capacity is capped for a net importing village.;In Essay 3, I present an empirical analysis of the effects of cash cropping on household welfare, and investigate the possibility of mental accounting among poor farming households. Using a crossection of Malawian maize and tobacco farmers, I propose an econometric framework to test for effects of source-specific income changes on nutritional quality. Results of a quantile regression show marginal effects of tobacco and maize income are significantly different for lower quantiles. After correcting for endogeneity of tobacco income, I find rural Malawian farming households display unequal marginal propensities to consume out of different income sources, with business profits having the greatest positive effect on dietary diversity. While not statistically significant, correcting for endogeneity switches the sign on tobacco profits from positive (and significant for households in lower nutritional quantiles) to negative. From a policy perspective, this indicates that programs that encourage cash cropping among marginal farmers may worsen nutritional outcomes among households who already suffer from poor diets. While results cannot be explicitly tied to mental accounting, the finding that money is not fungible gives way for future work on dynamic models of household choice that incorporate "psychological costs" of spending out of food crop income.