21 Household consumption increased on average by 32 percent between 1989 and 1995, and poverty incidence decreased by 29 percentage points. The growth in rural household incomes have been largely fueled by changes in relative crop prices'<sup>4</sup> and increased returns to location and access to road infrastructure. This is clearly illustrated by Dercon's simulations which show that consumption would have _declined_ by 13 percent and poverty would have _increased_ by 23 percent had there been no peace and no economic and agricultural reforms."<sup>5</sup> Interestingly, all poor households (even those who fell into poverty) benefited from the relative price changes that occurred. But those who escaped poverty benefited most. These findings suggest that the reforms and increased political stability substantially improved well-being of the poor, both directly through a favorable change in relative prices, and indirectly through an increase in the returns to market connectedness as determined by road infrastructure and distance to urban centers.

In addition to public endowments such as road infrastructure and location, private endowments are also found to be important for consumption growth and poverty reduction. Increases in land holdings or the quality of the land owned, and in adult labor reduced poverty by 14 percentage points. **16** Returns to land also increased,'<sup>7</sup> but because the poor typically possess little (and often low-potential) land, they profited much less than the average household from the increased returns to land. Finally, the occurrence of shocks (especially rainfall, but also illness shocks) had a large negative effect both on the growth process and poverty outconmes. If households had had access to full insurance protection from rainfall and health shocks, poverty would have declined by 42 percentage points compared with 29 percentage points in its absence. Dercon shows that the main reason why households fell into poverty during this period was mainly the combined effects of the rainfall and illness shock. Agricultural marketing reforms are shown to have benefited even the households that lost ground during the period.

> **14** These reflect mainly changes in food crop prices. Coffee prices also improved, yet it was grown in only one of the six sarnpled villages, and the coffee harvest had failed that year in that particular village because of a pest attack and drought. The effect of changing export crop prices cannot be evaluated from this sample, but its importance has been assessed explicitly in the Uganda case study described below. **'5** Dercon (1995) shows that the cereal marketing margins mainly improved because of the liberalization of the grain markets and only on some routes did the end of the war have a significant effect.

**16** Adult education levels are extremely low, less than I year per adult, and they are assumed not to have changed. The effect of education as such, as opposed to changes in returns to education, has thus not been evaluated in this study.

17 As the direct effect of changing producer prices has been controlled for, changes in returns to land result from other factors such as shifts in the underlying production technology potentially induced by the reforms.