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Lecture 14 Don DeVoretz

Lecture 14 Don DeVoretz. Agriculture: A Strategy for Development. Roles for Ag in Development. Raises income per capita with productivity Increases income equality Reduces rural urban migration Reduces population growth rate Reduces food imports, perhaps raises exports. Role of Demand.

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Lecture 14 Don DeVoretz

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  1. Lecture 14Don DeVoretz Agriculture: A Strategy for Development

  2. Roles for Ag in Development • Raises income per capita with productivity • Increases income equality • Reduces rural urban migration • Reduces population growth rate • Reduces food imports, perhaps raises exports

  3. Role of Demand • Factors that lead to shortage; • 1. Population Growth of 2.0 % per annum • 2. Growth in income per capita of 2.5 % and • 3. Elasticity of demand for foodstuffs of unity • Leads to annual increase in demand of 4-5% per annum

  4. Role of Supply • 1. Tenurial arrangements: • How is productivity affected by ownership of land? • What is APP of land, labour and capital by tenure ? • 2. Economies of scale: • Is large more productive than small? • Is there an optimal size for operation ? • 3. Agricultural production functions: • What is role of labor, land and technology? • 4. Technical change • What is labour bias in technical change ?

  5. Average Productivity and Tenure APP input • What is optimal size ? • Equalize MPP per unit cost • if cost of land and capital same, then X is optimal size APP Cap APP Land X X Hectacres

  6. Scale Economies in Ag • Start at C, small scale • Move to B, • Note K-Land ratio constant • Note large increase C-B • Move B to A • Note K-Land ratio constant • Note B-A less • Conclusion, increase inputs by t does output increase by more or less t? Land A B C Capital

  7. Green Revolution; Three Generations • 1. First generation: seed revolution • Mexico, wheat productivity 1950s • Philippines, rice IR8 and mariculture 1960s • India and Pakistan, wheat, cotton 1970 to 1980s • Africa, upland rice failed • 2. Second generation: • fertilizer pesticide • tube well • credit • marketing problem • 3. Third generation: Regional equity, income distribution and displaced workers

  8. Green Revolution; Third Generation • Third generation: all problems • regional equity, north-south issue • productivity differences • no land taxes in northern India • income distribution • wage labour and rise in land value • displacement of workers to urban areas

  9. Historical Growth Patterns • Annual change in per capita food output, 1950-2001 • Region LA F.E. N. E. Africa LDC • 1948-60 .4 .8 .7 .0 .6 • 1960-70 .6 .3 .0 -.7 .1 • 1970-80 .9 .7 .7 -1.2 .5 • 1980-94 .8 1.7 1.3 .0 .9 • 1995-01 1.0 1.8 1.1 -.05 .96

  10. What does the above tell us ? • 1. In general, improvement for LDCs 1970-01 • 2. Large differences, Africa versus Far East • Implications:   - Poverty in rural sectors has increased in Africa and most of Near East. - Note 68 % of African population is on land and only produce 20% of GDP • 3. Why do these differences arise ? • a. population growth • b. technological change • c. land tenure

  11. Productivity Gap: 2001 • Country Kilos grain per hec Pop • Japan 6,119 125m • USA 5,136 263m • Bangladesh 2,602 120m • Mexico 2,506 92m • India 1,943 929m • Nigeria 1,172 111m

  12. What Causes Productivity Gap?Risk Aversion • Why is technique A, which is less productive than technique B, chosen? • technique B is feed, fertilizer revolution • need credit, irrigation and no pests • no insurance schemes • failure is starvation

  13. Risk-Productivity Trade-off • Both mean of 8 • Range of A • 6 to 10 • Range of B • 4 to 16 • Mean variance of • A is 8/8 = 1 • B is 8/10 = .8

  14. Tenure and Productivity Country Mini %output Mini % of landLatifundio % outputLatifundio of land Argentina 43.2% 3.4% .8% 36.9% Brazil 22,5 .5 4.7 59.5 Chile 36.9 .2 6.9 81.3 Peru 88.0 7.4 1.1 82.4

  15. Policy Issues • Would land redistribution • raise output ? • lower output ? • increase equality ? • lead to more democracy or violence ?

  16. End of Show

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