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Development in the Midst of Drought: Evaluating an Agricultural Extension and Credit Program in Nicaragua

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  • Mullally, Conner
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    Abstract

    This essay is an evaluation of year one of the Rural Business Development (RBD) program for small rice farmers in León, Nicaragua. The RBD program is administered by the Millennium Challenge Corporation, and is designed to deliver agricultural extension advice and affordable credit in the form of inputs to farm households. This essay estimates the average impact of the program on rice yields and revenues utilizing inverse propensity score weighting combined with linear regression. In conducting statistical inference, it also accounts for the fact that agricultural outcomes are likely correlated over space in a small area such as the one studied here. The results suggest that the program had no impact on average, likely due to the presence of a severe drought during the 2008 – 2009 rice growing season, but that poorer households may have done better than their wealthier counterparts. This does not account for program costs, which when factored in would likely make the overall net benefit of the program negative. There may very well be long term benefits to exploiting extension advice and better access to credit created by the RBD program, and the it appears to have shielded poorer farmers somewhat from the impact of the drought. But the results highlight the danger of introducing programs aimed at raising productivity and incomes in areas subject to system unanticipated shocks. Incorporating risk management techniques or insurance against systemic risk into extension programs may improve welfare and encourage broader participation in agricultural productivity programs going forward.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania with number 108723.

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    Date of creation: 2011
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    Handle: RePEc:ags:aaea11:108723

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    Related research

    Keywords: development; extension; credit; spatial; impact evaluation; International Development;

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    1. Pedro Cerdán-Infantes & Alessandro Maffioli & Diego Ubfal, 2008. "The Impact of Agricultural Extension Services: The Case of Grape Production in Argentina," OVE Working Papers 0508, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
    2. Kim, Min Seong & Sun, Yixiao, 2011. "Spatial heteroskedasticity and autocorrelation consistent estimation of covariance matrix," Journal of Econometrics, Elsevier, vol. 160(2), pages 349-371, February.
    3. Godtland, Erin & Sadoulet, Elisabeth & de Janvry, Alain & Murgai, Rinku & Ortiz, Oscar, 2003. "The impact of farmer-field-schools on knowledge and productivity : a study of potato farmers in the Peruvian Andes," CUDARE Working Paper Series 963, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
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    6. Ashraf, Nava & Gine, Xavier & Karlan, Dean, 2008. "Finding Missing Markets (and a Disturbing Epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya," Working Papers 56, Yale University, Department of Economics.
    7. Wooldridge, Jeffrey M., 2007. "Inverse probability weighted estimation for general missing data problems," Journal of Econometrics, Elsevier, vol. 141(2), pages 1281-1301, December.
    8. Michael Carter & Christopher Barrett, 2006. "The economics of poverty traps and persistent poverty: An asset-based approach," The Journal of Development Studies, Taylor and Francis Journals, vol. 42(2), pages 178-199.
    9. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
    10. Foltz, Jeremy D., 2004. "Credit market access and profitability in Tunisian agriculture," Agricultural Economics, Blackwell, vol. 30(3), pages 229-240, May.
    11. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
    12. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    13. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
    14. Feder, Gershon & Lau, Lawrence J. & Lin, Justin Y. & Xiaopeng Luo, 1991. "Credit's effect on productivity in Chinese agriculture : a microeconomic model of disequilibrium," Policy Research Working Paper Series 571, The World Bank.
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