Agricultural Transformation and Rural Development (Chapter 9): Agricultural Transformation and Rural Development (Chapter 9) Note: Chapter 9 (9th edition) is the same as Chapter10 (Todaro-8th edition)


Agriculture and Rural Development Summary Outline (Chapter 9): Agriculture and Rural Development Summary Outline (Chapter 9) 1. The Imperative of Agricultural Progress& Rural Development 2.Agricultural Stagnation & Growth Since 1950 3.The Structure of Agricultural Systems in the Developing World 4. The Important Role of Women in Agriculture 5.The Economics of Agricultural Development 6.Toward a Strategy of Agriculture and Rural Development


1.The Imperative of Agricultural Progress and Rural Development: Why is agriculture crucial in LIC?: 1.The Imperative of Agricultural Progress and Rural Development: Why is agriculture crucial in LIC? The heavy emphasis in the past on rapid industrialization may have been misplaced. It was influenced by economic growth theories of 1950s and 60s such as the Harrod-Domar and the Lewis Models. Agricultural development is now seen as an important part of any development strategy. Why?


2.Agricultural Stagnation and Growth Since 1950: 2.Agricultural Stagnation and Growth Since 1950 Although agriculture employs the majority of the LDC labor force, Agriculture accounts for a much lower share of total output of GDP (see next table )


2.Agricultural Stagnation and Growth Since 1950: 2.Agricultural Stagnation and Growth Since 1950 Trends in food and agricultural production, 1950 -1994 vary among regions. Per capita food production has stagnated in developing countries, and actually declined in Africa. See table 10.4 and figure 10.1 next for these trends.


Slide9: Figure 10.1 Index of Per Capita Food Production in Developing Regions, 1970-1994


3.The Structure of Third World Agrarian Systems: The dual agricultural system in the World: 3.The Structure of Third World Agrarian Systems: The dual agricultural system in the World Two kinds of world agriculture 1. a highly “efficient”? agriculture with high production capacity with high output per worker. Capital and technology intensive agriculture. 2. A low-productivity agriculture of subsistence farming that barely sustains the population. There is a productivity Gap of these two systems of 50/1


3.The Structure of Third World Agrarian Systems: 3.The Structure of Third World Agrarian Systems Peasant agriculture in Latin America, Asia, and Africa, Latin America and Asia: similarities and differences The Latifundio-Minifundio pattern


Slide14: Figure 10.2 Lorenz Curves of Agricultural Land Distribution by Operational Holdings


3.The Structure of Third World Agrarian Systems: 3.The Structure of Third World Agrarian Systems Peasant agriculture in Latin America, Asia, and Africa Latin America and Asia: similarities and differences The Latifundio-Minifundio pattern Fragmentation and subdivision of peasant land in Asia, and African highlands Africa: extensive cultivation patterns


4.The Important Role of Women: 4.The Important Role of Women Women provide 60% to 80% of agricultural labor in Africa and Asia, and 40% in Latin America? These estimates vary? Data issues. Women work longer hours than men in some countries. There is also culturally determined division of labor based on Gender. Government assistance programs tend to reach more men, than women farmers.


5.The Economics of Agricultural Development: Transition From Peasant to Commercial Farming- How to transform agriculture: 5.The Economics of Agricultural Development: Transition From Peasant to Commercial Farming- How to transform agriculture Subsistence farming: low technology, high risk & uncertainty, and aim is survival. Different farmers have different risk aversion. Farmer A may be more risk averse, than farmer B, who is poorer. Also, A is more likely to innovate than B.


Slide18: Figure 10.3 Small-Farmer Attitudes towards Risk: Why It Is Sometimes Rational to Resist Innovation and Change


Differences in Risk Aversion of Farmers: Differences in Risk Aversion of Farmers Assume two production technologies A and B, where A shows lower mean crop yield of 10 than B, which shows higher mean crop yield of 12. A risk averse farmer will choose technology A since it has lower variance (risk) than technology B (see figure 10.4)


Slide20: Figure 10.4 Crop Yield Probability Densities of Two Different Farming Techniques


Slide21: Figure 10.5 Incentives under Sharecropping


Share-cropping vs Full ownership: Share-cropping vs Full ownership A farmer who owns his land fully will use the amount of labor Lf at the optimal level. using VMPL = Wa (optimal decision rule) Where VMPL = MPL X MRQ (price of the crop A share cropper receives only ½ of his effort under 50-50 sharecropping agreement will only employ Ls amount of labor ( see figure 10.5), this would be inefficient effort or labor use, since Wa< VMPL. These supported studies (Shaban, 1987) Results of Empirical Studies are mixed. Some have shown sharecropping can be efficient under uncertain environment.


6.The Economics of Agricultural Development: Transition From Peasant to Commercial Farming: 6.The Economics of Agricultural Development: Transition From Peasant to Commercial Farming Subsistence farming: risk aversion, uncertainty, and survival The transition to mixed and diversified farming… From divergence to specialization: modern commercial farming


7.Toward a Strategy of Agricultural and Rural Development: 7.Toward a Strategy of Agricultural and Rural Development 7.1. IMPROVING SMALL-SCALE AGRICULTURE -Technology and Innovation: Use and adopt appropriate technologies- capital intensive vs labor intensive ( biological, chemical, irrigation vs mechanical technology) -Appropriate government policies: Provide necessary institutional and pricing incentives: input and output price and policies Land Reform: Provide ownership and security of land- state ownership of land is problematic in some countries. -Supportive social institutions: Credit system, extension, farmer training, health services,etc


7.Toward a Strategy of Agricultural and Rural Development: 7.Toward a Strategy of Agricultural and Rural Development 7.2.Enhancing General Rural Development Modernizing farm structure to meet rising food demands. Creating an effective supporting system such as roads, irrigation, improved inputs, seeds, Agricultural research, land reform, etc.. Changing the rural environment to improve levels of living of rural people and farmers.


Conditions for Rural Development: A Synthesis: Conditions for Rural Development: A Synthesis 3 necessary conditions for realization of people-oriented agricultural & rural development 1. Land Reform: aimed at the objectives of increasing food production, promoting equity, and environmental protection. 2. Supportive Policies & Institutions: Government must provide necessary incentives, opportunities, access to credit, low taxes to enable small farmers to increase productivity. 3.Integrated Development Objectives: by raising both farm and non farm rural incomes through rural industrialization, job creation, and increasing provision of quality education, health, housing, and related social services.


Concepts for Review: Concepts for Review Agrarian systems Cash crops Diversified farming Family farm Green revolution Integrated rural development Interlocking factor markets Landlord Land reform Latifundio Medium-sized farms Minifundio Mixed farming


Concepts for Review, cont’d: Concepts for Review, cont’d Moneylender Patrón Per capita agricultural production Per capita food production Price bands Productivity gap Scale-neutral Sharecropper Shifting cultivation Specialized farming Staple foods Subsistence farming Tenant farmer Transactions costs