Does Agricultural Research reduce Poverty?

Stefan DerconCentre for the Study of African Economies, Economics Department and Blavatnik

School of Government, University of Oxford

and UK Department for International Development

Addis Ababa, 12-14 April 2016

Central Questions

• Does agricultural research create rural prosperity and reduce poverty?• If so, what are the pathways and mechanisms through which this works?

• Is there clear evidence?

• What lessons can we draw from past experiences – both successes and failures?• Is “success” of Asia being replicated in Africa?

• How can we improve our understanding of the pathways to impact?

The challenge? • Rural poverty across the world higher than urban poverty

• Multidimensional Poverty (MPI, often based on DHS): Incidence of multiple deprivations (Alkire et al, 2014) (% of population)

• Dominant livelihood of the poor: dependent on agriculture, in Africa largely as smallholders

• So large scale spending on agricultural research surely good for the poor?

Urban Rural

East Asia/Pacific (not China) 13 52

Latin America 2 17

South Asia 24 63

Sub-Saharan Africa 27 74

Evidence of Development Impact

• Clear causal links from agricultural research to development outcomes at the macro scale have been very difficult to demonstrate.

• There are certainly grounds for believing that this relationship could be strong:• Theory

• Quantitative evidence

• Descriptive and qualitative evidence

Theory• “Boosting food production will feed the world and defeat hunger”

• However, ‘food insecurity’ is a problem of poverty

• Focus has to be on how agricultural technology improvements impact on poverty in a society and economy

• Poor as consumers? Positive

• Poor as producers (smallholders) or workers?• Not always clear that all producers will benefit from higher productivity, as impact

on prices (mediated by the way economy works)

• Dependent on technology: impact on demand for and returns to capital, land, labour

• Net impacts: dependent on nature of technology and context, with plenty of scope of winners and losers. Assuming that the rural poor will benefit is naïve.

Quantitative Evidence• Empirical studies are often linked to particular cases or instances of

innovation. Lots of it is weak. • Comparing adopters and on-adopters – hard and often poorly done

• Summaries of evidence: mixed, ambiguous, it all depends…

• The “best” quantitative evidence to date has come from modelling exercises (econometric and CGE),

• consistently showing huge beneficial impacts of productivity improvements

• but in unconvincing ways given present-day understanding of method.• Econometric models struggle to convince statistically (Thirtle et al. ; Fan et al . 2000,

2002)

• Often assumptions or model structures drive CGE results.

Qualitative and Descriptive Evidence• Recall the Green Revolution in India

• wheat or rice promise in 1960s for India: 5 time yield benefit (10 for rice with optimal input packages).

• Was it good for poverty? • Yield gains in India 1960-1990: wheat 750 to 2200 kg/ha; rice 900 to

1700 kg/ha.

• Probably contributed to economic growth and kept food prices in check

• Poverty in India barely declined in this period – large scale reduction in poverty rates came in 1990s and 2000s

• How it the technology impacted on the poor brilliantly synthesized in a 1989 book by Michael Lipton and Richard Longhurst, entitled New Seeds and Poor People. … with generally positive verdict, but…

Lipton and Longhurst• The research did not pay enough attention to the profile of the poor

• In particular, they argued that the poor were increasingly landless or near-landless, or very small smallholders.

• In rice, increased demand for labour, but in wheat returns to land from mechanization (reducing demand for labour)

• Returns for farmer strongly dependent on complementary inputs (with differential access)

• Agricultural research system had not given enough attention to “socio-political distortions” in thinking through the features of the target economies. • Price declines (also linked to overall economic strategy in country)• Lower agricultural wages in real terms for many• Losers and winners from agricultural technology strongly dependent on

credit, land and other market distortions

What Has Changed Since 1989?Attention has shifted to Africa, with different set of issues and challenges.

• Different crops, more diverse agriculture, more difficult environments – affecting scope for research gains

• Different profile of the poor: • how does technology fit into this profile (labour saving,

• Different macro environment and different geographies: h• How does technology improvement fit in it? Does it contribute to the best

strategy to get poverty down

Profile of the Poor in Africa?But much still depends on positions in factors of production, income structure, consumption structure. Very poor data on stylised facts.

• Most of the poor are rural • Most are smallholders with rather small holding – across very marginal to very high

potential areas• Agricultural wage labour only 5% of rural income on average• Off-farm often a route out of poverty• 55% of (total) income from crops but not necessarily food• About 50% of smallholders are net buyers of food (35% in Niger to 65% in Tanzania),

often at relatively ‘marginal’ levels (or with timing issues)

• Not obvious that:• Growing more food is the most effective for the poor farmers• That technologies that increase demand for labour or reducing demand for labour in

agriculture are the best for poverty

Impacts on African rural poor?

• Technological change: direct effect on adopting poor?• What is the nature of technological change on demand for labour? Will it save

time, release time for off-farm or require more time?

• What is the impact of the price effect on profitability including of technology adoption?

• Price effect on consumption of net buyers?

• Winners and losers most likely…

• Impacts bound to come from indirect effects through growth and the process of structural transformation• Evidence shows that this is the fundamental force of growth and sustained

poverty reduction

• But via direct adoption of technology by the poor?

Agricultural Research, Growth, and Distribution• Targeting agricultural research to support economic growth and

transformation may be the route, but:

• Agricultural growth has a higher impact on poverty reduction than other growth

• Role of food prices will matter

• But is targeting production of smallholders the best way?

• Is agricultural productivity growth the best way of increasing growth? Not obvious at all.

• This is globally low productivity sector

• Gollin et al. (2014) agricultural labour productivity is 28% of productivity in non-labour productivity across Africa.

• Role of agriculture will depend on economic context

Economic context will matter… • For coastal and resource-rich countries, rural poverty alleviation will

not necessarily dependent on domestic production of staple foods or on the corresponding agricultural research.• In resource-rich countries, rural livelihoods will depend on the ability of

governments to manage macro environment effectively and to steer resource rents into inclusive programs.

• In coastal economies, with access to global markets, cash crops may be a better (or at least an additional) source of rural income.

• In landlocked economies (or poorly connected regions within coastal or resource-rich economies), smallholder staple food production for quasi-subsistence may be important as a means of delivering improvements in livelihoods.

Conclusion• Huge expenditure on R&D for agriculture in poor settings• Largely assumed impact on the poor• Worth learning from lessons from the past, as poverty impacts of Green

Revolution mediated by• Profile of the poor (labour, capital, land positions)• Macroeconomic and growth context• Despite massive promise for yield gains (even if on the ground lower)

• R&D for Africa• No obvious large yield gains promise ‘on the shelf’ • Diversity of the poor – smallholders, net buyers, less relevance of food crop in income• Macroeconomic heterogeneity means different ways of supporting structural

transformation

Ethiopia

• Fast growth • One of the big success stories of present-day Africa• Partly driven exceptionally by smallholder agriculture and productivity gains

• Drought and possibly hunger affecting 18 million people; 8 million in long-term safety net programme

• So how to focus research, needing to weigh.• Industrialization attempts: structural transformation with huge industrial zones, so

low food prices matter hugely for success• Booming smallholder agriculture in higher potential areas, especially in cereals, how

to promote this?• Emerging commercial agriculture, crucial for sustaining growth• Very marginal production systems in drought-prone areas