Dragan Filipovich on 'risk-sharing’ markets in small-householder farmer societies

On 23 November Dragan Filipovich, associate professor at Pompeu Fabra University and visiting professor at Autonomous University of Barcelona, ​​University of Alicante and University of Girona, will be the guest presenter at the final WIDER Seminar Series event for 2018.

Abstract - Risk-Sharing’ Markets in Small-householder Farmer Societies

Small-householder farmer societies, that is, societies made up of farms dependent on family labor and producing mainly for own consumption, were arguably the rule in ancient times, and to this date, around 2 billion rural people live in around 475 million small farms working on less than 2 hectares. Such households remain restricted to markets, and operate close to the subsistence threshold, making them highly vulnerable to weather and idiosyncratic shocks.

Understanding how these societies process risk is key to overcome poverty and ensure food security. In this study I analyze how such societies interact with markets to diversify production risks. Specifically, I posit the hypothesis that small-householder farmer societies—both in ancient times but also in the modern world—participate in what it is here denoted as ‘risk-sharing markets’, that is, markets that serve solely to channel eventual surpluses above a subsistence threshold.

These markets fail to induce increased specialization, so production remains oriented towards meeting conventional subsistence requirements. I argue that that because of this, ‘risk-sharing’ markets are vulnerable to ‘market unraveling’, and this in turn partially explains why they fail to reorient production away from subsistence. At the same time, ‘risk-sharing’ markets, by their very nature, are a poor means of risk diversification, not only because production responses are absent, but also because high transport costs, associated with the highly dispersed settlement patterns of small-householder societies, in combination with highly spatially correlated weather risks, undermine their operation.

To register your attendance email Ruby Richardson

WIDER Seminar Series

The WIDER Seminar Series showcases recent and ongoing work on key topics in development economics. The weekly sessions held in Helsinki are open to local and visiting researchers, students, policy makers, and others interested in development topics. Click here to learn more.