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Abstract

Improving market access and promoting participation in more lucrative markets among semi-subsistence farming households is crucial for poverty alleviation. This paper analyzes joint decisions about market participation and market choices among Bolivian potato farmers. First, stochastic dominance analysis is used to identify market choices that have high pay-off and limited risk; these are referred to as optimal marketing strategies. Second, a system of equations is estimated to identify factors contributing or restricting market entry, volume sold, and adoption of optimal market-ing strategies. Proportional and fixed transaction costs reduce income-generating opportunities associated with markets for all three dimensions considered in this study. Our analysis also suggests the possible existence of poverty traps since fetching higher price requires liquidity and high volume, while land and farm equipment are needed to achieve necessary volumes of production.

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