Welcome to Economics of Food and Agriculture in International Development

1
Welcome to Economics of Food and Agriculturein
International Development
Will MastersSIPA and The Earth Institute

• For today
• Motivation
• Overview of the course
• Overview of the subject
• Trends over time
• Differences across regions

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Motivation (mine)

• Background history
• School
• Travel
• Work
• Current projects

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Motivation (for this class)

• Food
• hunger, malnutrition, ill health
• Agriculture
• poverty, resource degradation
• Economics
• explain observations in a particular way
• as an equilibrium
• (a mutually acceptable transaction)
• among rational people
• (who optimize something,
• subject to constraints)

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Some strengths and limitations of economics

• I show life as it is, but stylized
  
• (Marcel Marceau in an NPR interview, 25 March
  1998)
• In order to know anything, it is necessary to
  know everything, but to talk about anything, it
  is necessary to neglect a great deal.
• (Joan Robinson, Economica 1941)
• Mathematicians are like Frenchmen whatever you
  say to them, they translate into their own
  language, and all at once it is something
  completely different.
• (Goethe, Maxims and Reflexions, 1829)

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Overview of the CourseWhere are we going?
https//courseworks.columbia.edu
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Overview of the Subject What do we mean by
international development?

• development change over time
• gain new things accumulation, innovation,
  growth
• lose old things natural resources, social
  relationships
• Im all for progress its change I cant
  stand. (Mark Twain)
• If a palace rises beside a house, the house
  shrinks. (Karl Marx)
• international differences across countries
• one path, or many? what can we learn from
  success/failure?
• All happy families are alike. (Leo
  Tolstoy)
• international development interactions
  between us
• trade, investment, migration, technology
  transfer
• Does our wealth come from their poverty?
• Can our wealth help alleviate their poverty?

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Overview of the SubjectWhat happens to food and
ag. in development?

• Like other sectors
• Accumulation of assets
• physical capital (buildings, equipment,
  livestock)
• human and social capital (education,
  institutions)
• Innovation of new technology
• inputs (improved genetics, fertilizers,
  pesticides)
• processes (crop rotations, associations,
  interactions)
• Transitions
• from natural resources to man-made ones
• from self-sufficiency to specialization trade
• Unlike other sectors

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Agricultural Employment as a Share of Civilian
Employment and Real Farm Output as a Share of
Real GDP
SOURCE U.S. Department of Commerce and the
Federal Reserve Bank of St. Louis. Reprinted
from K.L. Kliesen and W. Poole, 2000.
"Agriculture Outcomes and Monetary Policy
Actions Kissin' Cousins?" Federal Reserve Bank
of Sf. Louis Review 82 (3) 1-12.
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Food Expenditures as a Share of Total Consumer
Expenditures in the US
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Agriculture as a share of GDP vs. GNP per capita,
1989
Source GW Norton and J Alwang, Introduction to
Economics of Agricultural Development. New York
McGraw Hill, 1993.
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Agriculture as a share of employment vs. GNP per
capita, 1985
Source GW Norton and J Alwang, Introduction to
Economics of Agricultural Development. New York
McGraw Hill, 1993.
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Percent of income spent on food vs. GNP per
capita, 1980s
Source GW Norton and J Alwang, Introduction to
Economics of Agricultural Development. New York
McGraw Hill, 1993.
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Economic success agricultural decline?

• Agriculture declines with economic growth
• over time and across countries
• as a share of employment, income, expenditure
• but in what sense does agriculture really
  decline?
• does the level of output or consumption fall?
• do farmers get poorer?
• do farm prices fall?
• are there fewer farmers?

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Does agricultural output decline?
Source Drawn from U.S. Bureau of Economic
Analysis data ltwww.bea.doc.govgt.
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Do farmers incomes decline?
Real income per farm and productivity in the U.S.
Percent / index value
Thousands of 1992 dollars per farm
Source BL Gardner, 2000. Economic Growth and
Low Incomes in Agriculture. AJAE 82(5)
1059-1074.
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Do farm prices decline?
Ratio of US Farm Prices to Prices of all Goods
and Services
Index value, 1996100
Note Horizontal lines are decade
averages Source K.L. Kliesen and W. Poole, 2000.
" Agriculture Outcomes and Monetary Policy
Actions Kissin' Cousins?" Federal Reserve Bank
of St. Louis Review 82 (3) 1-12.
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Does the area of farm land or the number of
farmers decline?
Use of land and labor on U.S. farms, 1910-2000
Index value, 1948100
Source W.E. Huffman and R.E. Evenson, 2001.
"Structural and productivity change in US
agriculture, 1950-82." Agric. Economics 24
127-147, extended with more recent data from the
US Economic Report of the President.
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What happens to the number of farmers?
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Structural transformation

• The structural transformation is the economys
  shift from
• farm to nonfarm employment, income and
  expenditure.
• - but the land available for farming is roughly
  constant,
• - and the number of farmers rises and then
  falls,
• - so land per farmer falls and then rises
• Farm sizes change but farming does not
  industrialize
• - Family owned and operated farms dominate the
  sector, with some
• wage workers hired in to the family or hired out
  to others
• land and equipment rented, purchased or used on
  a share basis
• - Non-resident ownership arises mainly in
  livestock and processing.

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Structural transformation

• Many different things can cause the (relative)
  decline of agriculture
• Engels law (after Ernst Engel, 1857)
• demand for food rises slower than income
• Cochrans treadmill (after Willard Cochran,
  1979)
• rising output/farm pushes farmers out
• Bright lights
• non-farm prosperity pulls farmers out
• Dim prospects
• diminishing returns to workers capital, given
  that total land area is fixed

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Some arithmetic of structural transformation
If we divide the total workforce into farmers
and nonfarmers Lf Lt Ln (Lino. of workers
in sector i) And solve for the growth rate of the
number of farmers as a function of growth in
total and non-farm employment, we see that size
of the sectors matters a lot ?Lf (?Lt
?LnSn) / (Sf) (Sishare of workers in i) In
poor countries, even if non-farm employment grows
much faster than the total workforce, the number
of farmers may still rise quickly
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Demographic transition and structural
transformation

• Given the size and growth of the nonfarm sector,
  the key determinant of the number of farmers
  (and hence area/farmer) is population growth
  births, deaths and migration

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Demographic transition and structural
transformation

• The demographic transition is societys shift
  from high to low birth death rates (from large
  to small families)
• It began with a decline in death rates, followed
  by a decline in birth rates, creating a temporary
  burst of pop. growth.
• Todays developing countries had a much faster
  fall in death rates, leading to a faster, larger
  burst of growth, leading to faster decline in
  farm area per farmer.
• Developing countries mortality decline was most
  dramatic in children, leading to a faster shift
  in age structure
• first, more children/adult (the demographic
  burden),
• then, more child-bearing women (population
  momentum),
• then more working-age adults (the demographic
  gift)

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Demographic transition varies widely across
regions
Past and Projected Child Dependency
Source UN Population Division, World Population
Prospects The 2000 Revision (http//esa.un.org/un
pp)
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Africa is facing unusually rapid and sustained
growth
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Africas rural population will keep rising
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The role of physical geography
Demographic transition and structural
transformation are slow trends over time. We
also see a pattern in space
GDP per capita by latitude, 1995
Source J.D. Sachs, Tropical Underdevelopment.
Working Paper 8119. Cambridge, MA NBER.
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There is both correlation and variation across
countries (geography is not destiny!)
Income per person, 1995 (with sub-national data
for 19 countries)
Source Sachs, JD, Tropical Underdevelopment.
Working Paper 8119. Cambridge, MA NBER.
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There is both persistence and variation across
history (demography isnt destiny either!)
Angus Maddisons estimates of GDP per capita by
region, 1400-1998 (regions with above-average
income)
Source Calculated from data in Angus Maddison
(2001), The World Economy A Millenial
Perspective. Paris OECD.
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Some initially-poor regions have grown very fast
Angus Maddisons estimates of GDP per capita by
region, 1400-1998 (regions with average income or
below)
Source Calculated from data in Angus Maddison
(2001), The World Economy A Millenial
Perspective. Paris OECD.
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In conclusion

• Food and agriculture are very different from
  other parts of the economy, and the differences
  matter
• Food and agriculture are concerns of the poor,
  they are less important to the rich,
• Structural transformation out of agriculture is
  slow, and is closely linked to demography
  and geography.
• Coming up next
• food consumption and health, food demand
• households risk, technology, resource use
• markets prices, policy, and politics
• countries the agricultural sector as a whole