The number of people living in poverty is still very high and the progress we have made so far has been very uneven across countries, regions, and subgroups of people. Given that most of the rural poor derive their livelihood from agriculture, it has the potential to serve as a very potent tool for achieving the dual goals of poverty reduction and shared prosperity. However, the internal and external constraints faced by these households limit upward mobility. The three essays in this dissertation study how the rural poor in Pakistan make choices and how better program design can alleviate the constraints they face. The first essay investigates the participation decision of smallholder paddy farmers in a Warehouse Receipts Financing (WRF) program which can mitigate their credit and storage constraints, allowing them to increase their incomes. We a discrete choice experiment approach to study the decision-making process and find risk aversion and transaction cost erode the benefits for smallholder farmers making it an unattractive prospect. We find that likelihood of participation can be increased through better contract design which lower cost of participation and reduce exposure to price uncertainty. These findings have important implications for the optimal design of warehouse receipt financing contracts, as well as their general feasibility for marketing to small farmers. It also highlights that programs aimed to uplift smallholder farmers should not only address constraints of circumstance (e.g. access) but also internal constraints (e.g. risk aversion). The second essay aims to alleviate information constraints regrading fertilizer usage as its indiscriminate and faulty use can affect soil health. Evidence shows that soil quality in Pakistan has been deteriorating which can be partially explain by poor nutrient management. In this study we conducted soil tests and provided recommendations on use of organic and inorganic fertilizer.This study uses an experimental design with two treatment arms and a control group which received no information and its soil was not tested. The base treatment provided farmers with information on their soil health and recommended fertilizer use condition on the crops they cultivate. The second treatment arm complemented this information with a peer comparison which was used an encouragement mechanism to improve the efficacy of information provided. The study highlights some important constraints to information dissemination and provides some evidence on the use of peer comparison as a potential tool to improve efficacy of information campaigns. We see a statistically significant increase in manure usage and a heterogenous impact on Urea use but no impact on the overall fertilizer use. We find that farmers they were already using close to the recommended amount (within 1 bag deviation) increased their urea application rate. These findings suggest two underlying mechanisms at play. First, it alludes to liquidity constraints as farmers increased manure use which is cheap and those who could already afford higher quantities of Urea were able to respond to the recommendation of increasing application rates. The fact that we do not see impact on DAP further gives credence to this assumption as DAP is close to 3 times the cost of Urea. Alternatively, it could be that farmers who were away from the suggested fertilizer amounts did not trust the recommendations. The third essay studies the dynamics of warehouse receipts financing (WRF) demand by small scale risk averse farmers in Pakistan. A dynamic model is used to investigate how risk and time preferences, transaction costs, and uncertainty reduce demand for WRF, and even lead to non-participation in the program. The model is calibrated and solved for a representative small-scale farmer that grows paddy. Results show high transaction costs to be a major barrier to participation. Similarly, expectations about future prices also affect participation which drops to zero if the subjective probability of prices falling goes beyond 10 percent.
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