Agriculture and Rural
Development
The majority of developing
country population lives in rural areas (64% as opposed to 26% for developed
countries).
Though recall that this share
is decreasing as urbanization proceeds.
The majority of the developing
countries labor force is engaged in agriculture (58% as opposed to 5% in developed).
% of labor force in
agriculture
www.wri.org
Agriculture tends to account
for a larger share of employment than of GDP.
GDP share from agriculture
about 12% on average for developing (about 2% for developed in contrast).
This would suggest that a
focus on rural areas and agriculture should be part of a development strategy
designed to address poverty.
% of GDP from agriculture
Historical views: (from Staatz and Eicher)
Passive role to agriculture
during the 1950’s (the early phase of thinking about development).
Development was seen as
structural transformation of the economy, leading to a decline in agriculture’s
share of GNP and the share of the labor force employed in agriculture.
Working from the observed
fact that as income grows, the share of agriculture in
the economy declines. (recall the Kuznet’s characteristics)
An example is the Lewis model
(1954) that we considered earlier in the course.
The rural areas are a source
of labor and food for the urban sector. Focus is on drawing “surplus labor”
from rural areas.
A different source of the
view that the focus of development should not be on agriculture is due to Prebisch and Singer (49) which we also talked about earlier
in the course. (page
522 in Todaro)
They pointed out that there
is a tendency for the commodity terms of trade to turn against countries that
export primary products and import manufactures. This limits the prospects of growth through
primary product export.
Commodity terms of
trade: price ratio. Price index of exports
divided by price index of imports.
Why?
1) Engel’s
law – income elasticity of demand is lower for primary commodities than for
manufactured goods.
2) Substitution
of synthetic for natural resources (jute, sisal for example).
[also nature of technology change in industry versus
agriculture, and supply side issues of many primary product developing
countries can be cited]
Hirschman (58) focused on
linkages and integration. Recall our
discussion of forward and backward linkages.
The argument was that industry has more backward and forward linkage
potential than agriculture. Thus
emphasize industry to get multiple effects.
To the extent that there was
investment in the agricultural sector, it was based on diffusion of developed
country practices to developing country farmers.
A package was extended, with
the idea that adoption would lead to rural transformation (and
non-revolutionary transformation at that).
It was also assumed that
developing country farmers were inefficient, and could adopt efficient
practices developed in the advanced countries.
By the mid 1960’s, there
began to be a view that the ag sector was more than a
passive force in development, and could play a role.
Two main themes came out of
actually working in rural areas, rather than basing theoretical models on
developed country history.
1) Structural impediments (social and political) limited
the ability of rural producers to adopt extended technologies. Marxist critiques played a role here.
2) Rural farmers were responsive to useful things, not
tradition bound lumps. If they did not
adopt something, maybe they had a reason.
Schultz described rural farmers
as efficient but poor (64).
He suggested there was not
output growth waiting to happen by a reallocation of existing resources.
People who lived in these environments
had worked out over time reasons for allocating resources the way they
did. New agricultural technologies would
be needed.
So new research institutes
were developed. The
collaborative group for international agricultural research.
The link
here to land grants and CGIAR’s. Funding from countries, UNDP, FAO, WB, ADB,
Ford Foundation,…
http://www.cgiar.org/who/wwa_history.html
CIAT - Centro Internacional de Agricultura
Tropical
CIFOR - Center for International Forestry Research
CIMMYT - Centro Internacional de Mejoramiento de Maiz y Trigo
CIP - Centro Internacional de la Papa
ICARDA - International
Center for Agricultural Research in the Dry Areas
ICRISAT -
International Crops Research Institute for the Semi-Arid Tropics
IFPRI - International
Food Policy Research Institute
IITA - International
Institute of Tropical Agriculture
ILRI - International
Livestock Research Institute
IPGRI - International
Plant Genetic Resources Institute
IRRI - International
Rice Research Institute
ISNAR - International Service for National Agricultural
Research
IWMI - International
Water Management Institute
WARDA - West Africa
Rice Development Association
World Agroforestry
Centre (ICRAF)
WorldFish
Center
These began in the 1970’s. Why?
1) Response to Marxist critique such as the underdevelopment
theories we talked about briefly.
2) Response to observing the empirical fact of political
disasters (rapid growth in
3) Realization that the poor were not benefiting in many
cases.
4) Realization that urban sector could not keep up with
labor force growth.
These institutes generated a
great deal of empirical research on the nature of agricultural growth and
technology adoption, rural labor market functioning and the relationship to
migration, agricultural – rural economy linkages, market chains, farming
systems research.
Piles and
piles of microlevel research.
Also many worked to build up
host country / national research capacity (NARS in dev speak).
Integrated
Rural Development.
1) Increase output growth of small farmers (technology,
prices, institutions)
2) Increase demand for domestic production by urban
consumers (healthy urban sector and strong linkages)
3) Increase diversified base of rural economy that are
complements to the agricultural economy.
Basic
Needs. Growth with equity. Focus on women. Focus on poverty. Explicit attention on
health and nutrition. All these
lead to a broader view of the agricultural sector.
The 80’s began a swing back
to macro perspectives. Concerns about how far it was possible to go addressing basic needs
without also growth.
Move government out of
marketing.
Exchange rate issues were
discussed – overvalued currencies were a disincentive for farmers.
“Getting
prices right”.
General
issues of structural adjustment policies.
Where are we now? Moving toward microeconomic
and macroeconomic integration.
“Are macroeconomic reforms microeconomically coherent?” For example, households may be both producers
and consumers of a commodity such as rice (think of seasonal issues). What is net effect of letting the price
fluctuate? Also, the static nature of the macro models are being challenged by greater
understanding of the role of risk and vulnerability.
Move to the Todaro chapter,
to get a different perspective on agriculture.
A few other facts Todaro
notes about the agriculture sector in developing countries.
Per Capita food production is
for the most part increasing, but not at a very high rate. 1% per year or so.
However, in some areas (SSA,
Also, compare to GNP growth
rates to ag sector growth rates. Agricultural sector growth rates tend to be
below overall GNP growth rates.
What are the structural
characteristics of agricultural production we need to know about?
First, we need to be aware
that “dual economy” issues may be relevant here.
There is commercial,
mechanized, low labor high capital input, high productivity farming.
There is subsistence, high
labor low capital input, low productivity farming.
A
productivity gap. The cash value of output per farmer. Two ‘types’ of agriculture can exist side by
side in developing countries, one a developing country ‘type’ and the other a
developed country ‘type’.
Developed country output was
13 times greater than developing country output in 1960, 50 times greater in
2000.
Land
productivity. Kilograms of output per hectare from World
Resources Institute “earthtrends” http://earthtrends.wri.org/index.php
From an FAO study on agricultural productivity
“Agricultural Investment and Productivity in Developing Countries” (Zepeda, 2001)Selected Indicators
of Agricultural Productivity
|
Indicator |
Sub-Saharan
|
World |
|
Fertilizer
use (kg/arable ha, 1980) |
16 |
86 |
|
Fertilizer
use (kg/arable ha, 1995) |
13 |
94 |
|
Tractors
(per 1 000 ha cropland, 1993) |
3 |
21 |
|
Ag
output growth (percent/yr, 1980-1990) |
1.8 |
2.8 |
|
Ag
output growth (percent/yr, 1990-1996) |
2.1 |
1.7 |
|
Cereal
yield (kg/ha, 1980) |
1
100 |
2
230 |
|
Cereal
yield (kg/ha, 1995) |
1
041 |
2
561 |
|
Ag
productivity (US$/ha, 1993) |
68 |
236 |
Developed country agriculture
output per hectare is 2-5 times greater than the output for the same amount of
land in developing country agriculture.
We can identify three main
types of agrarian systems throughout the developing world.
1) Agricultural dualism (latifundio-minifundio). Frequently observed in Latin America, but
also exists in other areas. Colonial history. A
few landowners hold a vast majority of the land. High Gini coefficients for
land distribution (in the 0.8 to 0.9 range). Roughly 90% of the farms occupy less than 17%
of the land. (see
pages 431-3)
a.
Does this reflect economies of scale /
capital intensive production has high land requirements? Inverse relation between farm
size and productivity. Smaller
farms are lower cost producers of a given quantity of output. Smaller farms produce more per unit of
land. Land is used less efficiently in
the large farms and labor is applied intensively in small farms. Land tenure reform, land redistribution,
training, and access to credit can be a way of increasing national output and
addressing poverty of the small farmers.
2) Absentee landlord / tenant farming / sharecropping
systems. Frequently
observed in Asia. Village distribution
of land through central village authority was transformed during colonial era
to landlord – tenant system. Absentee owners of land (which is a bit different from the patron
living on the land in the latifundio system). Around 85% of tenanted land is sharecropped
in Asia, and the majority of the land in many Asian countries is tenanted
land. Role of the
moneylender (or food / input lender) in concentrating tenure in a few hands.
a.
Note economic efficiency argument that
resources will end up in the hands of the most productive user. Is this the case here? Again, land tenure reform, land
redistribution, training, and access to credit can be a way of increasing national
output and addressing poverty of the small farmers.
3) Land abundant, extensive cultivation. Frequently observed in
Africa. Some land is unused since
constraint is labor and low technological inputs. Planting by hand, using an ax or knife. Traction limited by tsetse fly. Intense cultivation of one field gives way to
intensive cultivation of another – shifting cultivation. Limits need for fertilizer. Labor constraints are seasonal, but seasonal
constraints limit output. Rainy seasons
one or two times per year, weeding / planting / harvesting all falls within a
certain window. Leads
to seasonal underemployment.
a.
This system is coming under pressure as
population grows and formal economy and state presence grows. Here, you need technological improvements
that allow more intense cultivation of given land, release labor constraint
(without requiring high capital inputs and displacing workers).
Land Reform:
Why would we think land
reform to provide formal tenure is a good thing?
1) Incentive
to invest.
2) Investment
horizon extended.
3) Credit
access and collateral.
When might it not work out as
anticipated?
1)Weak states lead land allocation to follow political
rather than efficiency arguments in distribution:
Platteau. (Dev and Change, 1996) Land tenure registration can in fact be risk
increasing for rural farmers in a context where traditional rights exist and
are understood, but a competing formal system is designed in a system where
political power influences who gets deeds.
2) Land reform takes place in contexts where
there is ambiguity over rights, leading to conflict.
In
3)Ambiguity in land rights is a risk mitigating mechanism.
Pastoral
land examples.
What other options for
improving agriculture are available?
How can we improve small
scale agriculture?
1) Technology and innovation.
Technology
tends to be labor saving, which is not always the best idea.
Technology
also can require capital investment, which can be a problem.
Challenge
to design low capital cost, non labor replacing, scale neutral
technologies. Agroforestry,
intercropping. Seed
storage.
Challenges 1:
The social
context of production.
Tasks in agriculture are
often “gendered”. Women transplant rice,
men clear fields, women harvest rice,…
Crops grown can also be
“gendered”. Women grow rice, men grow
peanuts.
Particular issues arise when
women grow subsistence crops and men grow cash crops. How will inputs be purchased (issues of cash
from husband and access to formal credit arise)? What crops will extension services target
(extension agents are usually staffed by males)? What happens when a subsistence crop moves
into the cash crop domain?
In
Milk
marketing example from northern
Senegal Peace Corps rice
program.
IRRI had developed IR-8, a
green revolution crop. A rice breeder
had crossed it with local varieties. It
has performed extremely well in on research station trials. But there was little interest in extension
from the national ag extension agency.
Rice is grown by women in the
area.
Rice is not a cash crop.
Baseline studies to establish
growing practices and varieties in the area.
“Loan” of 2
kilograms of rice seed. Loan is to be returned at the end of the
season. We monitor the plot, and a
traditional rice plot next to the trial plot.
A few techniques go with it:
Tilling
depth, manure, and plant density in seedbed.
Transplant period of 21 days.
Transplant
density.
Overall first year yield
improvement of 13% for transplanted rice and 21% for direct seeded rice. In adoption literature, you need to get 20%
to 30% to have some confidence of widespread adoption. For people who followed all the
recommendations, the results were better suggesting things would catch on. They were, at least during the 1992 season
when I left.
APEX
project in
Challenges 2:
Risk
Risk
minimization. The consequences of failure are severe. Farmers may stick with tried and true low
mean low variance techniques and crops, even when extension programs are
demonstrating new techniques that appear to offer higher returns.
Also, can
explain sharecropping as a response to risk. I accept a
lower share of the annual return even though I did all the work in return for
which the landlord guarantees me food in the crisis. Exploit me now, insure me later.
Resistance to proposals may
not be a manifestation of traditional stubbornness, but a response to the
farmer’s assessment of the risk or a lack of understanding of the larger
context of production by the extension agent.
2) Institutional and Pricing reform.
Prices fixed by state boards,
often to keep food prices low in the city.
Reduce role of marketing boards (but who will fill the gap?)
Policies that allow price
systems to create market incentives can work (but how to do so without
exacerbating risk?).
Policies that provide access
to credit, inputs, and information can help.
Policies need to recognize
that the agricultural sector is but one component of the overall rural
economy. As we have noted before, there
is a great deal of income diversification even in rural areas. We must be aware of how efforts to improve
agriculture impact these other activities, and how we can increase agricultural
output by increasing these activities.
We also should be aware that
priorities of people in rural agricultural areas may not be on agricultural
development.
Integrated rural development
– agriculture as a foundation of the rural economy, but linked with alternative
income generating activities, improved access to public goods and social
services.
Policy Summary:
Land Reform
·
Inverse Farm Size
– Productivity
·
Incentive to
invest / not degrade
·
Collateral
·
Equality
enhancing.
·
Problems with
weak states, not market allocation
·
Problems with
non-compensation
·
Problems with
ambiguity of ownership and traditional land tenure system
§
Risk minimizing
ambiguity
·
Problems when not
a component of broader program
Technology and Innovation
·
Low capital cost,
fit in labor profile, scale neutral (agroforestry, IPM, ...)
·
Non risk enhancing / mean
variance issues
·
Fits existing age
/ gender patterns or is at least aware of them
·
Problems when not
part of a broader program
Institutional Change
·
Market
institutions to increase volume and efficiency
·
Privatization
without loss of complementary services
·
Appropriate
credit
·
Risk minimizing,
security enhancing
·
Information
enhancing
Broader Rural Development
·
Overall quality
of lives improved
·
May not be about
agriculture