CASH CROP PRODUCTION, FOOD PRICE VOLATILITY, AND RURAL MARKET INTEGRATION IN THE THIRD-WORLD

Large farmers in the Third World often devote to cash crops a larger share of their land than do small farmers. This paper suggests a possible explanation: even in the presence of food markets, Third World farmers' food security is best assured by food self-sufficiency. A model of crop portfolio choice under multivariate risk is used to show that reasonable assumptions regarding risk and preferences reproduce the observed pattern. Simulations further indicate that food market integration reduces the need for food self-sufficiency. Policy implications are drawn regarding domestic trade liberalization and agricultural technology.