How Costly is it for Poor Farmers to Lift Themselves out of Subsistence?

Olivier Cadot (), Laure Dutoit and Marcelo Olarreaga ()

No 5392, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The main objective of this paper is to provide estimates of the cost of moving out of subsistence for Madagascar's farmers. The analysis is based on a simple asset-return model of occupational choice. Estimates suggest that the entry (sunk) cost associated with moving out of subsistence can be quite large somewhere between 124 and 153 percent of a subsistence farmer's annual production. Our results make it possible to identify farm characteristics likely to generate large gains if moved out of subsistence, yielding useful information for the targeting of trade-adjustment assistance programs.

Keywords: entry costs; Madagascar; subsistence; switching regression; threshold regression; unknown sample separation (search for similar items in EconPapers)
JEL-codes: F10 O12 O19 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-dev
Date: 2005-12
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Working Paper: How Costly is it for Poor Farmers to Lift Themselves out of Subsistence? (2005)
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