Labour Market Effects of Large-Scale Agricultural Investments
– Conceptual Considerations and Estimated Employment Effects –
IAMO Forum 2016
23 June 2016
Martin Ostermeier & Kerstin Nolte
Motivation
Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion 2
Increasing demand for land in low- and middle income countries
Source: The Land Matrix Global Observatory (retrieved May 6th, 2016).
Impact and implications for target countries heavily debated
Employment creation a key factor amongst community benefits
0
100
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0
5.000
10.000
15.000
20.000
25.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Nu
mb
er
of
de
als
Are
a u
nd
er
con
trac
t (i
n 1
,00
0 h
ect
are
s)
Area size under contract (N = 833 deals. 23.8 million ha in 2016)
Number of deals under contract
Research questions
Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion 3
What happens to the rural labour market if a commercial farm is set
up?
Does large-scale commercial farming lead to net employment
creation?
Methodology
Identify key determinants of the employment creation potential
Develop different scenarios in a transition matrix
Provide empirical estimates based on data
o Derive labour intensities of crops
o Estimate potential net employment effect
First round effects
Three determinants for employment creation potential
Former land use
Brownfield investment
Greenfield investment
Higher crowding out
Crop planted
Annual crop
Perennial crop
More labour intensive
Production model
Contract farming
Preserving employment opportunities
Conceptual framework
4 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
Second round effects
Backward linkages
Established global players
Mostly in industrialised countries
Forward linkages
High export rates of unprocessed goods
Mostly to industrialised countries
Price effects, wage effects, …
Employment creation effect rather weak
Hardly any empirical evidence
Conceptual framework
5 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
Conceptual framework
6 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
Final land use
Former land use
Commercial farm
Perennial Annual
no CF CF no CF CF
Bro
wn
fiel
d
inve
stm
ent
Commercial agriculture 1a 1b 1c 1d
Gre
enfi
eld
inve
stm
ent
Smallholder agriculture 2a 2b 2c 2d
Pastoralists 3a 3b 3c 3d
Forestry 4a 4b 4c 4d
Conservation 5a 5b 5c 5d
Final land use Former land use
Commercial farm
Perennial crops (46%)
Annual crops (54%)
no CF CF no CF CF Total
Bro
wn
fiel
d
inve
stm
ent
Commercial agriculture
1a 1b 1c 1d
9% 4% 20% 7% 40%
Gre
en
fiel
d in
vest
men
t
Smallholder agriculture 2a 2b 2c 2d
11% 2% 11% 3% 28%
Pastoralists 3a 3b 3c 3d
2% 1% 2% 0% 6%
Forestry 4a 4b 4c 4d
9% 12% 2% 0% 23%
Conservation 5a 5b 5c 5d
3% 0% 0% 0% 4%
Total (%) 34% 20% 35% 10% 100%
(n=958)
Results – Transition Matrix (% of size under contract)
7 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
. Africa Latin America Asia Eastern Europe Oceania
Former use
Commercial agriculture 20% 50% 37% 80% 11%
Smallholder agriculture 29% 30% 42% 15% 59%
Pastoralists 4% 12% 3% 4% n/a
Forestry 41% 8% 9% n/a 30%
Conservation 5% 1% 9% n/a n/a
Crop Annual 31% 81% 16% 85% 17%
Perennial 69% 19% 84% 15% 83%
Production model
CF 29% 22% 23% 2% 3%
No CF 71% 78% 77% 98% 97%
Results – Regional focus (% of size under contract)
8 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
Results – Estimated commercial labour intensities (TOP crops)
9 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 1,8 2
Wheat
Corn (Maize)
Soya Beans
Sugar Cane
Rice
0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 1,8 2
Rubber
Jatropha
Oil Palm
Coffee Plant
Banana
An
nu
al
Peren
nia
l
Results - Estimated labour intensities (annual vs perennial)
10 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
01
23
La
bo
ur
inte
nsity in
work
ers
pe
r h
ecta
re
Annual Perennial
Annual vs. perennial crops
Labour intensity
Results – Estimated employment effect (preliminary)
11 Motivation | Goal and methodology | Conceptual framework | Results | Next steps | Conclusion
Target Country Smallholder employment
Commercial employment
Net employment effect
Ethiopia (LI_sh=5.2) 1,103,463 50,359 -90%
Kenya (LI_sh=2.5) 228,333 23,226 -63%
Malawi (LI_sh=3.1) 34,153 8,039 -15%
Nicaragua (LI_sh=0.4) 1,100 363 -67%
Source:
Commercial: The Land Matrix Global Observatory
Smallholder: FAO Data Portrait Smallholders
Improve quantification of net employment effect
Further differentiate in former use (e.g. crops planted, production model
applied, etc.)
How to identify/treat labour-intensive annuals and capital-intensive
perennials?
Better information on labour intensities of smallholder (e.g. by crop,
region, etc.) and other former greenfields
Assess magnitude of individual determinant
Elaborate/ quantify second round effects
Extend regional analysis
Assess quality of jobs created
E.g. compensation of income loss, type of employment, etc.
Next steps and open questions
12 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
Most large-scale agricultural investments…
Take place on greenfields
Plant annual crops
Do not apply contract farming schemes
Have weak linkages to other sectors
Regional differences
Africa, Asia and Oceania: mostly greenfield, perennial crops and no
contract farming
Latin America: half greenfield, mostly annual crops and no CF
Eastern Europe: mostly greenfield, mostly annual crops and no CF
Concluding remarks
13 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion
Martin Ostermeier / Dr. Kerstin Nolte
GIGA German Institute of Global and Area Studies
Neuer Jungfernstieg 21 / 20354 Hamburg
Tel. +49-(0)40-42825-768
Email: [email protected]
Skype: Martin-Ostermeier
Homepage: http://www.giga-hamburg.de
Contact
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