Development Economics

1
(No Transcript)
2
7. Antipoverty Policies, Rural Development,
Agricultural Transformation

• What policies are most effective in reducing
  poverty and inequality in LDCs?

3
What policies are most effective reducing LDC
poverty and inequality?

• Capital credit, including group lending for
  microenterprises (such as Grameen Bank of
  Bangladesh)
• Education, training, human capital for poor
• Good-paying employment
• Health nutritional programs

4
Policies to reduce poverty inequality

• Population programs (smaller family size)
• Research technology to expand food, increase
  wages small farmer income
• Migration to urban areas
• Progressive taxes
• Transfers subsidies to old, very young, ill,
  disabled, unemployed, low income

5
Policies to reduce poverty inequality

• Emphasis on target group
• Workfare
• Adjustment programs with safety nets for poor,
  minorities, rural working people, women,
  children

6
Policies to reduce poverty inequality (Ch. 7)

• Major approach emphasize rural development
  rural income distribution, including increasing
  productivity income of rural poor
• LDC rural poor need increased access to
  productive resources technology
• 3.3 b (63 of 5.3 billion) people 500-700
  million poor live in rural areas
• 70 of 1/day are rural poor
• 20-25 of LDC rural are poor

7
Policies to increase rural income reduce rural
poverty

• Agrarian reform land redistribution
• Secure property use rights
• Improve farm implement dont use tractors
  combines
• Government administered credit
• Research technology dependent on available
  resources

8
Policies to improve rural income reduce rural
poverty

• Extension services
• Access to water other inputs
• Transport
• Marketing storage
• Price exchange rate policies

9
(No Transcript)
10
Policies to improve rural income reduce rural
poverty

• Improving rural services
• Rural industry

11
Agricultures role in transforming economy

• Producing domestic export surpluses
• Agriculture benefits industry through taxation,
  foreign exchange abundance, outflows of capital
  labor, falling farm prices
• Meiji Japan is example

12
Major rural groups in poverty

• Not uniform rural poverty
• Small landholders (less than 3 hectares or 7
  acres) (52 of LDC rural poor IFAD 24 landless
  households) (especially sub-Saharan Africa)
• Near landless
• Agricultural laborers (especially Latin America)
• Women 12 rural poor (overlap with others)
• No more than 3 hectares cropland per agricultural
  workers

13
Nonfarm rural income

• Incomes of farm households highly correlated with
  of nonfarm income (urban wages, remittances,
  etc.)

14
Nonagriculture/agriculture income ratios

• 19th-c Europe 21
• Asia Latin America 41
• Sub-Saharan Africa 81

15
(No Transcript)
16
Agricultural productivity in DCs LDCs

• Growth in food productivity per capita Table 7-1
  (next slide)
• LDC agricultural productivity 1/25 of DCs
• LDCs low levels of capital technology

17
(No Transcript)
18
Evolution of LDC Agriculture

• Evolution commonly occurs in 3 stages (1)
  peasant farming, mostly subsistence (2) mixed
  farming and (3) commercial farming.
• Peasants are rural cultivators running households
  whose main concern is survival.
• Commercial farmers runs a profit-oriented
  business enterprise.

19
Multinational Corporations (MNCs) Contract
Farming

• Contract farming has increased with
  globalization.
• Market concentration has increased in DCs LDCs.
• Example Philip Morris, Nestle, Sara Lee, PG,
  Tchibo 69 of world market shares in coffee
  roasting processing.

20
Sub-Saharan Africas food deficits insecurity

• Sub-Saharan Africa 0.4 p.a. change 1963-96
• Daily calorie consumption per capita, 1997-99
  Burundi, Congo DR, Ethiopia, Eritrea (lt 1800)
  Angola, Mozambique, Tanzania, Kenya, Zambia, CAR,
  Madagascar (lt2000) 18 countries (lt 2200),
  roughly FAOs daily requirement

21
Poor sub-Saharan African agricultural policies

• Roots precolonial colonial (pp. 231-232)
• Predatory rule
• Poor resource endowment land quality
• Increasing transport costs
• Little specialization economies of scale
• Lack of competitive markets

22
Poor sub-Saharan African agricultural policies
(cond)

• Absence of credit markets
• Short growing season for rainfed farming
• High risk of drought
• Endemic livestock diseases
• High malaria, TB, AIDS incidence
• No Green Revolution

23
Food in India China

• Which has better growth? (China since post-1979
  reforms)
• Which has lower malnutrition? China
• Which has a lower famine rate? India
• Sen entitlement The set of alternative
  commodity bundles that a person can command in a
  society using the totality of rights and
  opportunities that he or she possesses.

24
(No Transcript)
25
Agricultural growth policies

• Food production is enough to feed everyone on
  earth adequately if distribution were more equal
  (American Association for the Advancement of
  Science or Abelson 1975).
• Table 7-2 indicates LDC food deficits
  (disaggregated by region) for 1997 2000.

26
TABLE 7-2. Cereals Consumption and Deficits, 1997
and 2020 (million metric tons and percentages)
1997 1997 1997 2020 2020 2020
Region/Country Cereals Consumption (m.m.t) Cereals Deficit (Cereals Consumption Minus Production) (m.m.t) Cereals Deficit / Cereals Consumption () Cereals Consumption (m.m.t) Cereals Deficit (Cereals Consumption Minus Production) (m.m.t) Cereals Deficit / Cereals Consumption ()
Developed Countries 725 (104) (14.3) 822 (202) (24.6)
United States 244 (94) (38.5) 305 (119) (39.0)
European Union 15 173 (31) (17.9) 183 (30) (16.4)
Former Soviet Union 131 7 5.3 136 (8) (5.9)
Other 177 14 7.9 198 (45) (22.7)
Developing Countries 1,118 104 9.3 1,674 202 12.1
Latin America 138 14 10.1 211 4 1.9
Sub-Saharan Africa 83 14 16.9 156 27 17.3
West Asia/North Africa 129 45 34.9 196 74 37.8
South Asia 238 3 1.3 353 22 6.2
Southeast East Asia 530 28 5.3 758 75 9.9
World 1,843 0 0 2,496 0 0
Note () indicates surplus. Source Rosegrant,
Paisner, Meijer, and Witcover. 2001184.
27
Income elasticities of demand for food in LDCs

• Table 7-2 (next slide)

28
TABLE 7-3. Income Elasticities in Developing
Countries for Selected Commoditiesa
Item Income elasticity
Rice 0.010.30
Wheat 0.040.98
Vegetables 0.100.92
Vegetable oils 0.501.81
Beverages 0.74
Cocoa 0.75
Fish 0.611.50
Shrimp 1.25
Pork 0.500.97
Beef 0.751.85
Eggs 0.801.20
Poultry 0.402.20
Milk 1.502.50
Fruit 1.222.50
Sugar 1.502.00
Manufactures 0.743.38
a/ The percentage increase in quantity demanded
as a result of a 1-percent increase in income.
Source World Bank 1994f39.
29
Urban bias

• Lipton The most significant class conflicts are
  between rural and urban classes.
• Governments tend to allocate most of its
  resources to cities, an urban bias.
• Urban dwellers are more powerful, politically
  organized, and articulate.

30
Forms of urban bias

• 1. Increasing industrial prices relative to
  farm-good prices (Schiff Valdes (1998) label
  this lowering of agricultures terms of trade
  the plundering of agriculture in developing
  countries.
• 2. Concentrating investment in industry.
• 3. Tax incentives subsidies to pioneering firms
  in industry but not agriculture.
• 4. Setting below-market prices for foreign
  currency, which reduces domestic currency
  receipts from agricultural exports (the dominant
  exports of many low-income economies).
• Tariff quota protection for industry,
  increasing prices for farmers inputs.
• Spending more for education, training, nutrition,
  medical care, and transport in urban areas than
  in rural areas.
• In recent years, reforms have reduced urban
  biases in some LDCs.

31
Seasonal poverty hunger

• Many LDC rural households are subject to a
  poverty trap, in which selling labor and
  obtaining credit at high interest rates to ensure
  survival through the pre-harvest hungry season
  result in less income and high interest payments
  in future years.

32
Vulnerability of rural poor

• Rural LDC people, who face poor infrastructure,
  inequitable policies, high disease rates,
  inadequate support systems, and market failure,
  are highly vulnerable.
• One slip could send them deeper into poverty
  (World Bank 2001f138).
• For example, in rural Ethiopia, three-fourths of
  households suffered a harvest failure at least
  once over a 20-year period, contributing to
  significant fluctuations in farm income.

33
Agricultural biotechnology

• Biotechnology The application of biology to
  human use. (Burke 1999).
• From 1996 to 2003, genetically modified crops
  increased 40-fold to 7 million farmers in 18
  countries growing 69 million hectares (167
  acres), about 18 of the worlds food-crop
  cultivation. Included are enhanced insect
  resistance, herbicide tolerance, virus resistant
  genes, and other quality improvements in crops.
• LDC needs are critical enough that many
  economists would rather err on the side of
  adopting technologies to expand food production.