Two questions are asked about the relationship between domestic prices and world prices of agricultural commodities: are variations in world prices transmitted to domestic prices, and do these variations in world prices constitute an important component of variations in domestic prices? Domestic prices are regressed on world prices in various forms, taking into account the possible effects of exchange rates and inflation. The empirical analysis is based on data from the Food and Agriculture Organization of the United Nations for 58 countries for 1968-78 and for the countries of the European Community for 1961-85. The results show that most of the variations in world prices are transmitted and that they constitute the dominant component in the variations of domestic prices. Agricultural products are on the whole tradable, and every country trades in some agricultural products. In the absence of intervention it is expected that domestic prices of such products will vary with world prices. It is well known, however, that agriculture is subjected to considerable intervention, which creates a gap between world prices and domestic prices and which generates crosscountry variations in agricultural prices (see, for example,

In Africa, most development strategies include efforts to improve the productivity of staple crops grown on smallholder farms. An underlying premise is that small farms are productive in the African context and that smallholders do not forgo economies of scale-a premise supported by the often observed phenomenon that staple cereal yields decline as the scale of production increases. This paper explores a research design conundrum that encourages researchers who study the relationship between productivity and scale to use surveys with a narrow geographic reach in order to produce more reliable results, even though results are better suited for policy decisions when they are based on data that are broadly representative. Using a model of endogenous technology choice, we explore the relationship between maize yields and scale using alternative data. Since rich descriptions of the decision environments that farmers face are needed to identify the applied technologies that generate the data, improvements in the location specificity of the data should reduce the likelihood of identification errors and biased estimates. However, our analysis finds that the inverse productivity hypothesis holds up well across a broad platform of data, despite obvious shortcomings with some components. It also finds surprising consistency in the estimated scale elasticities.

Labor is the single most important factor in determining determinants of intersectoral migration. One national income. As economies grow, agricultural labor fundamental determinant is income differences across declines as a share of total labor and converges to a level sectors. As such, migration should stop when income of 2 or 3 percent. Off-famn migration facilitates the differences reach a certain level. development of nonagriculture, but historically the Larson and Mundlac provide a method of measuring process spans decades.the level at which intersectoral migration will cease. Larson and Mundlak argue that the pace of the process While there are credible reasons for a permanent is a fundamental outcome of i dynamic equilibrium difference to exist between sectoral incomes, the authors based on expectations of lifetime earnings and the cost of find no empirical evidence of a permanent wedge. migration. The authors present an empirical model of the This papera product of the Commodity Policy and Analysis Unit, International Economics Departmentis part of a larger effort in the department to understand and measure the determinants of econoric growth. The study was funded by the Bank's Research Support Budget under the rcsearch project "Determinants of Agricultural Growth" (RPO 679-03).Copies of this paper are available free from the World Bank, 1819 H Steet NW, Washington, DC 20433. Please contact Jean Jacobson, room R2-07S, extension 33710 (45 pages). February 199S. The Poly Reward, Wokn Paper Sams diunata he xdngs of uw* u pogrs to wwrwa e ex chng of ide abou deopmenst seAn object1woftheseriastoget thefidigs otquky. ec fthe praatisarke lanfslypa ished The papers cy dx xams of te sand s e ueand daccordigly. Th findings6 iburpreadm and cos ar the autborson and sbould not be atribued to the WorldBank its Execut Board ofDirecors or an of its membe coutris

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Poor households with little or no wealth are particularly vulnerable to risks that reduce incomes and increase expenditures. This book addresses many of the risk-coping strategies for the rural poor, with a focus on micro level and household actions. Largely, these discussions concern risks that can be shared within a community or extended family. While effective for independent risks, these strategies are rather ineffective for covariate or systemic risks. This paper focuses on private and public mechanisms for managing such covariate risk for natural disasters. When many households within the same community face risks that create contemporaneous losses for all, the coping mechanisms discussed in other papers in this project are likely to fail. Such covariate risks are not uncommon in many developing countries, especially where farming remains a major source of income. The paper focuses on risks that are related to weather events (excess rain, droughts, freezes, high winds, etc.) that have a severe impact on rural incomes. Weather insurance could cover the covariate risk for a community of poor households through formal and informal risk-sharing arrangement among households that are purchasing these weather contracts. Given some recent Mexican innovations that are targeted at helping the poor cope with catastrophic weather events, we use Mexico as a case study to support some of our general concepts.