Poverty and the Environment: Investment Poverty and the Role of Assets in Generating Welfare for Farmer Households in the Province of Herrera, Panama
Total Page：16
File Type：pdf, Size：1020Kb
Poverty and the Environment: Investment Poverty and the Role of Assets in Generating Welfare for Farmer Households in the Province of Herrera, Panama. Anni Maaria Penttinen (born Könönen) ACADEMIC DISSERTATION To be presented, with the permission of the Faculty of Agriculture and Forestry of the University of Helsinki, for public examination in the Auditorium of the Arppeanum, Snellmaninkatu 3, Helsinki on 14 November 2008, at 12 noon. Environmental and Resource Economics University of Helsinki, Finland Faculty of Agriculture and Forestry Department of Economics and Management Publications Helsinki 2008 ii Opponent: Professor Rauli Svento, University of Oulu, Finland Pre-examiners: Professor Anni Huhtala, MTT Agrifood Research Finland Professor Markus Jäntti, Åbo Akademi, Finland Supervisor: Professor Markku Ollikainen, University of Helsinki Instructors: Docent Hannu Rita, University of Helsinki Docent Anja Nygren, University of Helsinki ISSN 1235-2241 ISBN 978-952-10-5005-3 (paperback) ISBN 978-952-10-5006-0 (PDF) iii University of Helsinki, Faculty of Agriculture & Forestry, Department of Economics and Management Poverty and the Environment: Investment Poverty and the Role of Assets in Generating Welfare for Farmer Households in the Province of Herrera, Panama. Anni Penttinen Abstract: Poor farmers have been blamed for environmental degradation in developing countries. Struggling to survive, they have been claimed to overexploit their natural resource base; but empirical testing has provided confusing evidence. To clarify the discourse, Thomas Reardon and Steven Vosti proposed the concept of investment poverty. It identifies the potentially large group of households that are not poor by traditional welfare poverty measures, but that are too poor in that their surplus above the welfare poverty line is too small to allow them to make investments for the conservation of their natural resource base. They also emphasize the role of assets in generating welfare for rural households, thus affecting production and investment decisions. This research pursues two questions: How can investment poverty be conceptualised and measured? And, which are the welfare-enhancing effects of household assets? Empirical data is collected in the province of Herrera of the Republic of Panama. 402 farmer households are interviewed with a structured questionnaire, using a non-probabilistic quota sampling frame. Household welfare is measured with household consumption and income aggregates, and traditional welfare poverty lines are calculated. This allows to divide the studied households by their per capita consumption aggregates into extremely poor (15,4% of households), moderately poor (33,6%) and non-poor (51,0 %). Comparisons reveal that welfare poverty groups differ significantly not only in asset endowments, income and investment strategies, but also in household structure and in their access to infrastructure and extension services. Although clearly defined in theory, the empirical measurement of investment poverty is challenging. In Herrera, pure conservation investments are not found and welfare is not associated with the sustainability of land use. Hence, the investment poverty line is studied as a level of welfare below which household welfare ceases to be linearly associated with investments that have both productive and conservation aims. Such an investment poverty line, located roughly at twice the annual price of a minimum nutrition, is surpassed by 42,3% of studied households. Investment non-poor households are characterized by both spouses working, high level of social involvement, high farm productivity, growing input-intensive crops, and naturally by having accumulated more land, cattle, vehicles, education, and better housing than the investment poor households. The contribution of assets to household welfare is explored by hypothesizing mechanisms through which land, livestock, education and labour force could enhance welfare, and under which conditions. Results of multinomial logistic regressions using the elaboration method reveal that among extremely and moderately poor households, education is the only studied asset contributing to higher welfare levels. Among the moderately and non-poor households, on the other hand, education, land and labour force contribute to higher welfare through several mechanisms, but depending on conditioning variables, such as input use. There is no automation by which assets generate welfare flows towards households. And, asset accumulation strategies change as welfare increases; the mechanisms are different among the poorest from among the richest households. The relationship between poverty and the environment remains problematic. Overcoming the investment poverty line can be seen as the necessary price of overcoming poverty and accumulating assets in the long run, but under current circumstances it is way out of reach for the poorest Herreran households. Even beyond the investment poverty line environmental sustainability is not necessarily achieved, if cattle herds increase and pastures spread. Keywords: poverty, land degradation, farmer household economics, investment behaviour, Panama, Central America iv Table of contents Abstract ……………………………………………………………………… iii Table of contents ……………………………………………………………. iv List of tables and list of figures……………………………………………… vi List of abbreviations ………………………………………………………… x Acknowledgements …………………………………………………………. xi 1. Introduction ……………………………………………………………… 1 1.1 Background on the poverty-environment discourse ………………… 1 1.2 The research agenda ………………………………………………… 4 2. Poverty and the environment: the theoretical framework .……….… 9 2.1 Conceptual framework of investment poverty ……………………… 9 2.1.1 Assets, welfare poverty, investment poverty and components of the environment ……………………………… 9 2.1.2 Household and village behaviour: determinants of income and investment strategies and their environmental impacts … 12 2.1.3 The role of conditioning factors ……………………………… 16 2.2 Developments of the investment poverty framework ……………….. 17 2.3 Empirical applications of the investment poverty framework ………. 22 2.4 The investment poverty framework in this study …………………… 28 2.4.1 Operationalization of concepts ………………………………. 28 2.4.2 Statistical methods …………………………………………… 30 3. Survey of farmer households in the province of Herrera, Panama …. 37 3.1 The research site …………………………………………………….. 37 3.1.1 The republic of Panama and its Herrera province …………… 37 3.1.2 Agricultural production conditions in Herrera ………………. 44 3.1.3 Infrastructure and markets in Herrera ……………………….. 52 3.2 Farmer interviews …………………………………………………… 56 3.2.1 Design of the farmer household questionnaire ………………. 57 3.2.2 Sampling, data collection and processing ……………………. 58 3.3 Sample description ………………………………………………….. 65 3.3.1 Selected indicators …………………………………………… 66 3.3.2 Error analysis ………………………………………………… 70 3.4 Conclusions …………………………………………………………. 72 4. Measuring welfare in the province of Herrera ……………………….. 74 4.1 Consumption and income as measures of welfare …………………… 74 4.2 Measuring household welfare in the province of Herrera ...…………. 77 4.2.1 The consumption aggregate in Herrera…………………………. 79 4.2.2 The income aggregate in Herrera ………………………………. 84 4.3 Explorations in household welfare …………………………………… 87 4.4 Conclusions …………………………………………………………... 91 v 5. Welfare poverty in the province of Herrera …………………..………. 94 5.1 Measurement of welfare poverty ……………………………………. 94 5.1.1 Basic welfare poverty measurement methods ………………… 95 5.1.2 Definitions of poverty lines …………………………………… 96 5.2 Poverty lines for the province of Herrera …………………………….. 99 5.2.1 The extreme poverty line ……………………………………… 99 5.2.2 The moderate poverty line and resulting poverty groups .…….. 104 5.2.3 Poverty depth, regional considerations and error analysis …..…107 5.3 Comparison of the poverty groups: a preliminary analysis ………… 111 5.3.1 Differences in natural, human, on-farm and off-farm resources 112 5.3.2 Differences in household behaviour …………………………. 118 5.4 Conclusions …………………………………………………………. 122 6. Investment poverty in the province of Herrera …………………….. 126 6.1 Conservation investments: definition and measurement issues …… 126 6.2 Conservation practices and investments in Herrera ……………….. 131 6.3 The investment poverty line ……………………………………….. 134 6.3.1 Determinants of the investment poverty line …………………. 135 6.3.2 Measuring investment poverty through land use sustainability 138 6.3.3 Measuring investment poverty though productive conservation investments …………………………………… 143 6.4 Comparison of the investment poor and investment non-poor …… 147 6.5 Conclusions ……………………………………………………….. 152 7. Poverty and assets: welfare-generating mechanisms of farmer household assets in the province of Herrera ………………………….. 156 7.1 Welfare-generating mechanisms of assets: theory and hypotheses … 156 7.1.1 The basic welfare-generating mechanisms of assets ………… 157 7.1.2 Focal assets and their postulated impacts …………………… 159 7.2 Multinomial logistic regression and the elaboration method ..………. 164 7.2.1 Multinomial logistic regression model ……………………… 164 7.2.2 Elaboration ……………………………………………………. 166 7.3 Empirical results for the focal assets ………………………………… 170 7.3.1 Welfare-generating mechanisms in the province of Herrera … 170 7.3.2 Contrasting the results to previous findings ……………….. 188 7.4 Conclusions …………………………………………………………. 191 8. Conclusions ………………………………………………………..…….. 195 9. Bibliography …………………………………………………………..…. 206 10. Personal communications ………………………………..………………