Friday, October 21, 2011

Some good explanations on the economics of droughts

I started this morning with reading the USaid global water newsletter, and found a very interesting article on the the economics of drought.
I think one lesson to retain is, that many farmers living in a crop-livestock mixed system produce food to feed their families and consequently are not affected to much by food price volatility. On the contrary, pastoralists who mostly live in the the drought affected zone, do rely on food markets to access food. They sell livestock to get cash with which they then buy staple food. In time of droughts, livestock prices collapse (excess supply because too many people need to sell) and staple food prices increase (supply shortage), leaving people hungry. Interventions should therefore aim at stabilizing prices, the article shows how the Ethiopian government does this with the productive safety net program.

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