Transcript PPT 490Kb

Agriculture and poverty reduction:
making the connection
John Farrington
Overseas Development Institute and UK
Department for International Development
London
Impacts of agricultural growth
– in theory
Through:
• profitability gains for farmers
• Labour market gains for labourers
• Product prices for consumers
• “knock-on” effects on demand (inputs, processing,
marketing)
• “knock-on” effects on investment
• increase in tax yields
• Increased informal transfers to those chronically
unable to engage in the productive economy
Impacts - evidence
Large body of evidence on impacts of impacts of
agricultural productivity growth:
• Irz et al, 2003: “each 1% growth in agricultural
productivity generates a decrease of between
0.6% and 1.2% in those living on less than
$1/day”
• Hazell and Haddad, 2001: including discussion
of pro-poor agricultural research prioritisation
• Dorosh and Haggblade, 2003: “investments in
agriculture generate the highest impacts on the
poor [in sub-Saharan Africa]”
Transmission mechanisms through
growth - questions and issues
Transmission mechanisms directly through growth
– how well do markets work?
• “market failure is the norm, not the exception, in
many parts of Africa” (Omamo, 2003)
• conventional features of market failure –
transaction costs raised through lack of transport
and communications infrastructure, weak contract
enforcement, moral hazard, inadequate insurance
markets, high risks which cannot be insured
against, externalities, increasing economies of
scale, highly imperfect competition…..
• but also those less commonly considered – e.g.
segmented and interlocked markets – see below
Transmission via markets:
imperfections attributable to
subsidies
•
in India, mechanisation subsidies displaced
labour and allowed large farmers to capture
most of benefit of later stages of Green
Revolution
•
currently, subsidies in India (canal
irrigation, power for pumped irrigation,
fertiliser, guaranteed purchase scheme – in
total approx 13% of ag GDP) – benefit
mainly richer farmers in richer
States……(Gulati and Narayanan, 2003)
•
they crowd out productive investment, are
inequitable, inefficient and environmentally
damaging
Impeded transmission via markets:
segmentation
• “any form of non-economic discrimination” – does
not include discrimination by skills, productivity,
actuarial risk (in finance and insurance markets),
but does include:
• Gender discrimination – paying less to women
than can be justified on productivity grounds;
intra-household constraints on women’s choice
• Discrimination on basis of religion or ethnicity (e.g.
against tribals in India)
• Discrimination on basis of social status (e.g. caste
system in India)
Ref: Deshingkar and Farrington on India
Impeded transmission via
markets: interlocking
• Interlocking as a risk aversion mechanism –
landlord or moneylender will help out in
crises
• BUT he then sets adverse conditions in
markets for finance, labour, products,
rental/sharecropping etc
• AND impedes entrepreneurial capacity
Segmentation and interlocking prevent the poor
from acting as “free market agents
exercising rational choice”
Ref: Deshingkar and Farrington on India
Transmission via social protection,
including transfers
In general, agricultural growth can enhance tax
yield, but need assessment of the efficiency
of taxation and redistribution mechanisms:
 To address acute situations – emergency
shelter, clothing, food aid….
 To trampoline the temporarily poor back into
the productive economy (e.g. WB Social Risk
Management Framework)
 To reach the chronically poor – those unable
to engage fully in markets (very elderly, sick,
injured, women with large numbers of
dependents), and those who are poor across
generations
“Trampolines”
 risk- and vulnerability-reducing mechanisms:
New forms of crop and livestock insurance (Hess,
2003)
Hedging in markets (Virengis)
Microsavings, microcredit and microinsurance
But money is fungible, so need to address
household shocks and stresses via insurance
against ill-health, injury, death, and via savings and
credit for marriage expenses, funeral expenses…..
Transfers to the chronically
poor
 transfers in food or in cash? Food transfers
are politically popular, but costly to administer,
and potentially as corruptible as cash
transfers (www.livelihoodoptions.info)
 cash transfers have advantage of enhancing
demand in local markets; food transfers may
diminish it – even the chronically poor engage
as consumers
 robust transfer mechanisms involve
automated payment of small amounts with
minimal scope for discretion by local officials
 evidence that some transfers (e.g. social
pensions in S Africa) are used in part for
productive purposes (investment in ag;
investment in grandchildren’s education….)
AND release informal transfers for productive
investment
Conclusions
• Agricultural development is essential for poverty
reduction, BUT….
• Market imperfections (including regressive
subsidies) are pervasive and need to be
addressed to enhance poverty-reducing impacts
of agriculture
• Enhancing labour productivity without reducing job
opportunities is the key – what prospect under
globalisation?
• Social protection (including transfers) has
important roles to play – money is fungible, so
what is absorbed in household shocks and
stresses is lost to agric.
References:
•
•
•
•
•
•
Deshingkar, P and Farrington, J (forthcoming) Market segmentation and
interlocking in Andhra Pradesh and Madhya Pradesh, India. Natural Resource
Perspectives Paper. London: ODI
Dorosh, P and Haggblade, S (2003) Gropwth likages, price effects and income
distribution in sub-Saharan Africa. Journal of African Economies, 12 (2) 207-235
Hazell, P and Haddad, L (2001) Agricultural research and poverty reduction. 2020
Brief #70. Washington DC: IFPRI.
Hess, U (2003) Innovative Financial Services for Rural India: Monsoon indexed
lending and insurance for smallholders. Agriculture and Rural Development
Department Working Paper 9, Washington DC: World Bank
Irz, X, Lin Lin, Thirtle, C and S Wiggins (2001) Agricultural productivity growth and
poverty alleviation. Development Policy Review 19(4) 449-466.
Omamo, SW and Farrington, J (2004) Policy research and African agriculture: time
for a dose of reality? Natural Resource Perspectives No. 90. London: ODI
Thank you