Cities and agricultural transformation in Ethiopia

ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

Cities and agricultural transformation in Ethiopia Joachim Vandercasteelen, Seneshaw Tamru, Bart Minten and Johan SwinnenIFPRI ESSP

Transformation and vulnerability in Ethiopia: New evidence to inform policy and investmentsGetfam HotelMay 27, 2016Addis Ababa

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Introduction Transformation of agriculture deemed

important but progress has been slow in Africa

Urbanization – a new factor for transformation in Africa

City dwelling in Sub-Saharan Africa increased by 160% between 1990-2014

Urban population in Africa expected to triple by 2050

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Why study this? Most research focused on changes in

crops or off-farm employment

Little evidence on impacts on staple crops, that most of the rural population makes a living from

Therefore, Does proximity to urban centers affect

farmers’ agricultural practices?

We study the case of Ethiopia and teff

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From 3.7% to 14% between 1984 and 2007

In 2012: 17% in cities

Projections World Bank (2015): 5.4% annual growth; In 2028: 30% of population in cities

1996/1997 2010/2011

Urbanization in Ethiopia

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Ethiopia’s super crop-teff

23.4% - grain area 17.1 % - grain production

Most important crop in value terms in the country: o 2.5 billion USD in 2013/14

More demanded by urban consumers Rapid growth of cities and income

growth leading to greater demand

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Methodology Stratified random sample in 2012 1,200 farmers in five major teff

production zones 38% of national teff area 42% of the commercial surplus

Urban proximity - main independent variable (ETB/quintal):

1. from the farm to the market center2. from the market center to the Addis wholesale market by truck

Non-parametric regressions Advantage: No functional form specified

What are the relationships between proximity and different outcomes of interest?

Three major outcome variables:1. Prices2. Input3. Intensification

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Prices

1020

3040

50W

age

/ day

0 50 100 150Transport cost (Birr /Qt)

Wage (Birr /day)40

060

080

010

0012

00P

rice

(Birr

/Qt)

0 50 100 150Transport cost (Birr /Qt)

Teff price (Birr /Qt)

-200

00

2000

4000

6000

8000

Birr

/ H

a/ Y

ear

0 50 100 150

Transport cost (Birr /Qt)

Land rent (Birr /Ha/year)

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Use of inputs

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Intensification

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Multi-variate regression Strong effect of urban proximity on:

Prices Use of inputs Measures of intensification (land and labor

productivity) Profits

No strong effects of population pressure

A strong direct effect (through better transaction costs, knowledge, information)

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Explaining the direct effect• Channel 1: Transaction costs

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Explaining the direct effect• Channel 2: Monetization of production factors

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Explaining the direct effect• Channel 3: Access to information and

knowledge

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What did we find? Strong positive effect of urban

proximity on: output prices, wages, land rental rates, input use, and profitability

Strong indirect effect - changing price ratios of factor and output prices

Strong direct effect -transaction costs, knowledge, information

No significant effect of rural population increases (population density increases)

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Implications1. Market access matters for rural populations

- ensuring appropriate infrastructure and low transportation costs

2. Cities - engine for agricultural transformation

- ensuring that cities can grow, e.g. stimulating rural-urban migration and improved tenure conditions.

3. Access to inputs and knowledge

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THANK YOU!