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Abstract:
Using data on agricultural traders in Madagascar, this paper shows that social network capital has a large effect on firm productivity. Better connected traders have significantly larger sales and value added than less connected traders after controlling for physical and human inputs as well as for entrepreneur characteristics. The analysis indicates that three dimensions of social network capital should be distinguished: relationships with other traders, which among other things help firms economize on transactions costs; relationships with potential lenders; and family relationships, which reduce efficiency, possibly because of the blurring of firm boundaries. We find no evidence that social capital favors collusion.

Abstract:
Global retail companies ("supermarkets") have an increasing influence on developing countries, through foreign investments and/or through the imposition of their private standards. The impact on developing countries and poverty is often assessed as negative. In this paper we show the opposite, based on an analysis of primary data collected to measure the impact of supermarkets on small contract farmers in Madagascar, one of the poorest countries in the world. Almost 10,000 farmers in the Highlands of Madagascar produce vegetables for supermarkets in Europe. In this global supply chain, small farmers' micro-contracts are combined with extensive farm assistance and supervision programs to fulfill complex quality requirements and phyto-sanitary standards of supermarkets. Small farmers that participate in these contracts have higher welfare, more income stability and shorter lean periods. We also find significant effects on improved technology adoption, better resource management and spillovers on the productivity of the staple crop rice. The small but emerging modern retail sector in Madagascar does not (yet) deliver these benefits as they do not (yet) request the same high standards for their supplies.

Abstract:
Global retail companies ("supermarkets") have an increasing influence on developing countries, through foreign investments and/or through the imposition of their private standards. The impact on developing countries and poverty is often assessed as negative. In this paper we show the opposite, based on an analysis of primary data collected to measure the impact of supermarkets on small contract farmers in Madagascar, one of the poorest countries in the world. Almost 10,000 farmers in the Highlands of Madagascar produce vegetables for supermarkets in Europe. In this global supply chain, small farmers' micro-contracts are combined with extensive farm assistance and supervision programs to fulfill complex quality requirements and phyto-sanitary standards of supermarkets. Small farmers that participate in these contracts have higher welfare, more income stability and shorter lean periods. We also find significant effects on improved technology adoption, better resource management and spillovers on the productivity of the staple crop rice. The small but emerging modern retail sector in Madagascar does not (yet) deliver these benefits as they do not (yet) request the same high standards for their supplies.

Abstract:
This paper uses a unique, spatially-explicit dataset to study the link between agricultural performance and rural poverty in Madagascar. We show that, controlling for geographical and physical characteristics, communes that have higher rates of adoption of improved agricultural technologies and, consequently, higher crop yields enjoy lower food prices, higher real wages for unskilled workers and better welfare indicators. The empirical evidence strongly favors support for improved agricultural production as an important part of any strategy to reduce the high poverty rates currently prevalent in rural Madagascar.

Abstract:
This paper examines the mechanisms that transmit isolation into poverty in Madagascar using household survey data combined with a census of administrative communes. Given the importance of agriculture to the rural poor, where nine out of ten poor persons is engaged in farming, we concentrate on isolation manifesting itself in the form of high transaction costs such as the cost of transporting agricultural commodities to major market centers. We find that (a) the incidence of poverty in rural Madagascar increases with remoteness; (b) yields of major staple crops fall considerably as one gets farther away from major markets; (c) and the use of agricultural inputs declines with isolation. Simulation results using output from rice production function estimates suggest that halving travel time per kilometer on major highways (feeder roads) will increase primary season rice production by 1.3 (1.0) percent.

Abstract:
Rural areas dependent on agricultural income, are often among the poorest in developing countries. However, little distinction is generally made within the agricultural sector. This lack of distinction hinders targeting of agricultural investments towards poorer farmers. This paper illustrates, using a production function analysis with flexible marginal returns, how agricultural production activities and returns to agricultural production factors differ by poverty level in the case of Madagascar. The results show that access to primary education is relatively more beneficial for poorer agricultural households while additional secondary education has no effect on agricultural productivity. Returns to agricultural inputs are significantly higher for poorer agricultural households. Land inequality increases as land sales markets benefit the richer households and as the rich engage more in extensification while rental markets improve agricultural efficiency and may thus benefit poor and rich alike. Land titling has little effect on improved agricultural productivity. More formal land titling is therefore not sufficient to change the bad performance of agriculture of the last decades.

Agriculture, poverty, production function, Madagascar

Abstract:
Generalized cost recovery is one of the basic principles of the new Water Law that has recently been adopted by the Malagasy government. However, the effect of this change in policy is still poorly understood. Based on contingent valuation surveys in an urban and a rural area in southern Madagascar, this study analyzes the effect of changes in prices for water services. The results suggest that a minimum size of 90 households in a village is necessary to reach full cost recovery for well construction. Given that this is significantly above the current size of villages in the survey area, full cost recovery seems therefore impossible and subsidies are necessary to increase access to improved water services. Cost recovery for maintenance is relatively easier to achieve. In urban areas, water use practices and willingness to pay for water services depend highly on household income. To better serve the poor, it is therefore suggested that rich households, who rely on private taps, cross-subsidize poor households as a significant number of households is unwilling or unable to pay for water from a public tap. Given that public taps make up a small part of the total consumption of the national water company JIRAMA, lower income from public taps are shown to have only a marginal effect on its total income. However, as experiences in other countries as well as in Madagascar have shown, a fee on public taps is necessary as water for free leads to spoilage, does not give any incentive for the distributor to expand networks, and might therefore be a bad policy for the poor overall.

water demand, water use, willingness to pay, improved water supply

Abstract:
This paper presents comparative qualitative and quantitative evidence from rural Kenya and Madagascar in an attempt to untangle the causality behind persistent poverty. We find striking differences in welfare dynamics depending on whether one uses total income, including stochastic terms and inevitable measurement error, or the predictable, structural component of income based on a household's asset holdings. Our results suggest the existence of multiple dynamic asset and structural income equilibria, consistent with the poverty traps hypothesis. Furthermore, we find supporting evidence of locally increasing returns to assets and of risk management behavior consistent with poor households' defense of a critical asset threshold through asset smoothing.

Abstract:
Slash-and-burn agriculture in poor tropical countries is one of the main causes of conservation payments, slash-and-burn agriculture, biodiversity deforestation, leading to environmental costs and to potential externality effects on lowland agricultural productivity. Under innovative environmental policies, direct conservation payments to farmers are starting to be implemented to induce them to abandon slash-and-burn agriculture as well as the use of forest resources altogether. However, appropriate compensation levels are often difficult to get at. Using a stochastic payment card format in a case study in Madagascar, it is estimated that farmers would abandon slash-and-burn agriculture and forest use for median annual compensation payments at a lower bound of around 85$ and 177$ per household respectively. As expected, the econometric analysis shows that there exists a systematic relation between poverty and the required compensation for forgone land use. While poorer households depend relatively more on forest products, they accept a lower amount to abandon slash-and-burn agriculture and forest use. Better educated and older households require higher payments.

Conservation payments, slash-and-burn agriculture, biodiversity

Abstract:
Despite large amounts invested in rural roads in developing countries, little is known about their benefits. This paper derives an expression for the willingness-to-pay for a reduction in transport costs from the canonical agricultural household model and uses it to estimate the benefits of a hypothetical road project. Estimation is based on novel cross-sectional data collected in a small region of Madagascar with enormous, yet plausibly exogenous, variation in transport cost. A road that essentially eliminated transport costs in the study area would boost the incomes of the remotest households-those facing transport costs of about USD 75/ton-by nearly half, mostly by raising non-farm earnings. This benefit estimate is contrasted to one based on a hedonic approach.

Transport Economics Policy & Planning, Rural Roads & Transport, Economic Theory & Research, Rural Transport

Abstract:
This paper investigates the relationship between poverty and crime. Following a disputed presidential election, fuel supply to the highlands of Madagascar was severely curtailed in early 2002, resulting in a massive increase in poverty and transport costs. Using original survey data collected in June 2002 at the height of the crisis, we find that crop theft increases with transitory poverty. We also find that an increase in law enforcement personnel locally reduces cattle theft which, in Madagascar, is a form of organized crime. Theft, thus, appears to be used by some of the rural poor as a risk coping strategy. Increased transport costs led to a rise in cattle and crop theft, confirming earlier findings that, in Madagascar, geographical isolation is associated with certain forms of crime.

Abstract:
Given the large share of major staples in the budgets of the poor, governments in many developing countries intervene in food markets to limit variation in the prices of staple foods. This paper examines the recent experience of Madagascar in stabilizing prices through international trade and the implications of adjustments in tariff rates. Using a partial equilibrium model, we quantify the overall costs and benefits of a change in import duties for various household groups, and compare this intervention to a policy of targeted food transfers or security stocks.

Food Policy, Price Stabilization, Trade, sub-Saharan Africa

Abstract:
This paper investigates the role of the media in reducing corruption. We analyze data on personal capture of public education expenditures by local officials in Madagascar. We find that corruption can be successfully constrained through a combination of media programs and monitoring. More transparent funding mechanisms and access to mass media reduce capture.

However, the impact of the media is conditional on the characteristics of the population. With high illiteracy in poor regions, the effectiveness of newspaper and poster campaigns is limited, and radio programs are more important to reduce capture.

Abstract:
This paper uses a partial equilibrium framework to evaluate the relative efficiency, distributional and revenue implications of rice tariffs and targeted transfers in Madagascar, especially in the context of identifying their respective roles for poverty alleviation. Although there are likely to be substantial efficiency gains from tariff reductions, these accrue mainly to higher income households. In addition, poor net rice sellers will lose from lower tariffs. Developing a system of well designed and implemented targeted direct transfers to poor households is thus likely to be a substantially more cost-effective approach to poverty alleviation. Such an approach should be financed by switching revenue raising from rice tariffs to more efficient tax instruments. These policy conclusions are likely to be robust to the incorporation of general equilibrium considerations.

Abstract:
This paper uses an exceptionally rich data set to test the extent to which markets in Madagascar are integrated across space, time, and form (in converting from paddy to rice) and to explain some of the factors that limit arbitrage and price equalization within a single country. In particular, we use rice price data across four quarters of 2000-2001 along with data on transportation costs and infrastructure availability for nearly 1400 communes in Madagascar to examine the extent of market integration at three different spatial scales - sub-regional, regional, and national - and determine whether nonintegration is due to high transfer costs or lack of competition. The results indicate that markets are fairly well integrated at the sub-regional level and that factors such as high crime, remoteness, and lack of information are among the factors limiting competition. A lack of competition persists at the regional level and high transfer costs impede spatial market integration at the national level. Only six percent of rural communes appear to be intertemporally integrated and there appear to be significant untapped opportunities for interseasonal arbitrage. Income is directly and strongly related to the probability of a commune being in interseasonal competitive equilibrium.

Abstract:
Following an electoral dispute, the central highlands of the island of Madagascar were subjected to an economic blockade during the first half of 2002. After the blockade ended in June 2002, user fees for health services and school fees were progressively eliminated. This paper examines the provision of schooling and health services to rural areas of Madagascar before, during, and after the blockade. We find that public services were more resilient to the blockade than initially anticipated, but that health services were more affected than schools. The removal of user fees had a large significant effect on public services that is distinct from the end of the blockade and the increase in school book provision.

Abstract:
This paper uses an exceptionally rich data set to test the extent to which markets in Madagascar are integrated across space at different scales of analysis and to explain some of the factors that limit spatial arbitrage and price equalization within a single country. We use rice price data across four quarters of 2000-2001 along with data on transportation costs and infrastructure availability for nearly 1400 communes in Madagascar to examine the extent of market integration at three different spatial scales - sub-regional, regional, and national - and to determine whether non-integration is due to high transfer costs or lack of competition. The results indicate that markets are fairly well integrated at the sub-regional level and that factors such as high crime rates, remoteness, and lack of information are among the factors limiting competition.

Abstract:
This paper uses an exceptionally rich data set to test the extent to which markets in Madagascar are integrated across space at different scales of analysis and to explain some of the factors that limit spatial arbitrage and price equalization within a single country. We use rice price data across four quarters of 2000-2001 along with data on transportation costs and infrastructure availability for nearly 1400 communes in Madagascar to examine the extent of market integration at three different spatial scales - sub-regional, regional, and national - and to determine whether non-integration is due to high transfer costs or lack of competition. The results indicate that markets are fairly well integrated at the sub-regional level and that factors such as high crime rates, remoteness, and lack of information are among the factors limiting competition.

Abstract:
We estimate the probability of deforestation at the plot level for Chiapas and Oaxaca, two poor Mexican states with high levels of biodiversity. Results highlight the importance of physio-geographic endowments as well as policy variables and allow to test explicitly for aggregation bias. They also suggest that, if combined with information on the biodiversity value of specific plots, such models could be of great relevance for policy by allowing to identify the ex ante risk of deforestation.

Abstract:
This study explores the constraints on agricultural productivity and priorities in boosting productivity in rice, the main staple in Madagascar, using a range of different data sets and analytical methods, integrating qualitative assessments by farmers and quantitative evidence from panel data production function analysis and willingness-to-pay estimates for chemical fertilizer. Nationwide, farmers seek primarily labor productivity enhancing interventions, e.g., improved access to agricultural equipment, cattle and irrigation. Shock mitigation measures, land productivity increasing technologies and improved land tenure are reported to be much less important. Poorer farmers have significantly lower rice yields than richer farmers, as well as significantly less land. Estimated productivity gains are greatest for the poorest with respect to adoption of climatic shock mitigation measures and chemical fertilizer. However, fertilizer use on rice appears only marginally profitable and highly variable across years. Research and interventions aimed at reducing costs and price volatility within the fertilizer supply chain might help at least the more accessible regions to more readily adopt chemical fertilizer.

Abstract:
Using original survey data, we examine how insecurity affects welfare. Correcting for unobserved heterogeneity and possible endogeneity, we find an effect of insecurity on incomes, school enrolment, health status, and infant mortality. Results are robust to the inclusion of various shocks potentially affecting both welfare and insecurity. But the significance of the insecurity effect varies somewhat with the method used. We further find a significant effect of insecurity on the provision of certain public services, notably schooling and health care, and in the placement of development projects. Taken together, the evidence suggests that insecurity is an important determinant of welfare in the country studied.

Crime, school enrolment, health, project placement

Abstract:
During the past decades the global food system changed dramatically with increased trade in high-value food products, increased exports from developing countries, increased consolidation and dominance of large multinational food companies, and increased proliferation of public and private food standards. As a consequence, global food trade is increasingly organised around vertically coordinated supply chains rather than around spot market transactions. While there is consensus that these structural changes are profoundly changing the way food is produced and traded, there is no consensus on the overall welfare implications of increased high-value food exports and supply chain restructuring in poor countries. In this paper we discuss the income and poverty implications of expanded horticulture exports and changing supply chain structures for rural households in Sub-Saharan African exporting countries. We put together the economic arguments; distinguish different channels through which rural households are affected; provide evidence from three comparative case-studies on high-value horticulture exports; and derive implications for policy makers, private investors, and the development aid community.

trade, poverty, modern supply chains, Africa

Abstract:
During the past decades the global food system changed dramatically with increased trade in high-value food products, increased exports from developing countries, increased consolidation and dominance of large multinational food companies, and increased proliferation of public and private food standards. As a consequence, global food trade is increasingly organised around vertically coordinated supply chains rather than around spot market transactions. While there is consensus that these structural changes are profoundly changing the way food is produced and traded, there is no consensus on the overall welfare implications of increased high-value food exports and supply chain restructuring in poor countries. In this paper we discuss the income and poverty implications of expanded horticulture exports and changing supply chain structures for rural households in Sub-Saharan African exporting countries. We put together the economic arguments; distinguish different channels through which rural households are affected; provide evidence from three comparative case-studies on high-value horticulture exports; and derive implications for policy makers, private investors, and the development aid community.

trade, poverty, modern supply chains, Africa

Abstract:
This paper studies the political economy of relief aid allocation using empirical evidence from relief programs after a major cyclone (Gafilo) hit Madagascar in March 2004. Relief was provided by the Government of Madagascar as well as local and international aid agencies. Aid allocation was generally more likely in areas with a higher need for aid, but there were substantial differences between aid allocation by the government and by international aid agencies. The likelihood of receiving aid from the government was higher in cyclone-affected communes with higher radio coverage and with stronger political support for the government. Relief from aid agencies was not affected by media or political factors but was more likely to go to poorer and easier accessible communes, whether or not they were affected by the cyclone.

political economy, natural disasters, aid, Madagascar, Africa

Abstract:
Higher world food prices have led many developing countries to adopt policies to mitigate the impact on low-income households. This article sets out a partial equilibrium framework to evaluate the efficiency, distributional, and revenue implications of alternative policy responses. The model is applied to evaluate tariff reductions and targeted transfers in Madagascar. Although lowering tariffs generates substantial efficiency gains, these accrue mainly to the top half of the welfare distribution, and poor net sellers are actually worse off. Developing a system of targeted direct transfers to poor households is likely to be a substantially more cost-effective approach to poverty alleviation.

Abstract:
This article examines the mechanisms that transmit isolation into productivity. In particular, we study the effect of isolation and transport infrastructure on welfare and agricultural productivity in the case of Madagascar. Madagascar is a good case study given the bad shape of its infrastructure and therefore the significant variation in isolation. Based on comprehensive household survey data combined with a census of communes, we discover a strong poverty-isolation relationship. Further we find the inverse relationship between agricultural productivity and isolation to be surprisingly strong. We isolate the following reasons why productivity might decline with isolation: (i) transportation-induced transaction costs, (ii) the inverse relationship between plot size and productivity, (iii) increasing price variability and extensification onto less fertile land, and (iv) insecurity.

transport costs, transaction costs, regional development

Abstract:
This study looks at public service delivery in rural areas of Madagascar. The blockade of the central highlands of Madagascar by a defeated president let us examine the short-term effect of a large unanticipated macro shock and subsequent elimination of user fees on the rural delivery of health and education services. We found enrolment in rural primary schools surprisingly resilient to the crisis, probably because it unfolded in the middle of the school year. In contrast, the blockade led to a large drop in health care services, measured by the number of patient visits to health care centres. Part of this effect can be explained by an increase in monetary poverty. After the blockade, user fees were suspended in schools and health centres but the measure was not applied immediately in all rural communes. Controlling for supply effects, time dummies and school and health centre fixed effects, we find that the suspension of user fees is associated with a significant increase in both school enrolment and visits to health centres.

O12, I18, I28

Abstract:
Formalizing land rights has been promoted as a way to encourage agricultural investment and stimulate land markets, yet little is known about the benefits of such policies in Sub-Saharan Africa, where the preconditions for success are less favorable. The analysis uses a large sample of plots from an intensively titled rice-growing area of Madagascar and compares land-specific investments, land productivity, and land values for titled and untitled plots cultivated by the same household. Having a title has no significant effect on plot-specific investment and correspondingly little effect on land productivity and land values. These results are broadly consistent with a simulation of a theoretical model of investment under expropriation risk calibrated to the same data. A cost-benefit analysis suggests that the current system of formal titling should not be extended in rural Madagascar and that any new system of land registration would have to be quite inexpensive to be worthwhile.

Q15

Abstract:
Some African food markets can still seem to operate inefficiently after price liberalisation. This seems mainly due to the existence of significant transaction costs because of small-scale operations, and is influenced by lack of grading, deficient infrastructure and information systems. It is shown in the case of retail markets in Kinshasa that search, supervision and other difficult-to-measure transactions costs are more important in the margin of food products than the measurable marketing costs (e.g., storage, transport). It is also shown through time series analysis that most of the price transmission between wholesale and retail happens in the same week and that price asymmetry, i.e., the different transmission of price increases compared with price decreases, is present for most products. Products characterised by relatively more standardisation and homogeneity are shown to have lower retail margins and to behave symmetrically. A model based on kinked demand curves and search costs might explain this asymmetric price behaviour.