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Larson, Donald F.

Development Research Group, World Bank
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Rural Development Policy; Natural Resource Policy; Agricultural Productivity and Growth; Climate Change Policy and Markets; Commodity Markets and Risk
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Development Research Group, World Bank
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Last updated: January 31, 2023
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Donald F. Larson is a Senior Economist with the World Bank’s Development Research Group. He holds a B.A in economics from the College of William and Mary, an M.A. in economics from Virginia Tech, and a Ph.D. in Agricultural and Resource Economics from the University of Maryland. With colleagues, he has authored or edited five books, including An African Green Revolution: Finding Ways to Boost Productivity on Small Farms, a forthcoming volume from Springer, and The Clean Development Mechanism: An Early History of Unanticipated Outcomes, a forthcoming volume from World Scientific. He has published numerous book chapters and journal articles, with an emphasis on agricultural productivity and growth; food and rural development policies; natural resource policies; the institutions and markets related to climate change; and the performance of commodity futures and risk markets. During his time with the World Bank, Don has participated in policy discussion in Africa, Eastern Europe, Central Asia, East Asia, Latin America, and the Caribbean. He was a member of the team that launched the World Bank’s Prototype Carbon Fund.  
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Subject: TRANSACTION COSTS × Country: Mexico × Start date: 2002 × End date: 2002 ×

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    Can Financial Markets be Tapped to Help Poor People Cope with Weather Risks?
    (World Bank, Washington, D.C., 2002-03) Skees, Jerry; Varangis, Panos; Larson, Donald; Siegel, Paul
    Poor households in rural areas are particularly vulnerable to risks that reduce incomes and increase expenditures. Most past research has focused on risk-coping strategies for the rural poor, specially on micro-level and household actions. These are risks that can been shared within a community or extended family. These strategies are effective for independent risks, but ineffective for covariate or systemic risks. The authors focus on private and public mechanisms for managing covariate risk for natural disasters. When many households within the same community face risks that create losses for all, traditional coping mechanisms are likely to fail. Such covariate risks are not uncommon in many developing countries, especially where farming remains a major source of income. The authors focus on risks related to weather events (such as excess rain, droughts, freezes, and high winds) 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 arrangements among households that are purchasing these weather contracts. Given recent Mexican innovations targeted at helping the poor cope with catastrophe weather events, the authors use Mexico as a case study. In Mexico, poor households are exposed to systemic risks, such as droughts and floods, that affect the economic livelihood of their region. Catastrophic insurance is useful for small farmers, although commercially oriented small farmers may wish to obtain coverage for less catastrophic events. Weather insurance could meet this need. It pays out according to the frequency and intensity of specific weather events. Because weather insurance depends on the occurrences and objective measure of intensity of a specific event, it does not require individual farm inspection that can be very costly for small farm. The authors argue that a key issue of delivering insurance to small farmers is the existence of producer organizations. In Mexico, the farmer mutual insurance funds provide a good example. These funds provide insurance to their members by pulling together resources to pay for future indemnities and reinsures itself from major systemic risks that could hurt simultaneously all their members.