E ndogenous Technology Choice and Africa’s Green Revolution

1. Endogenous Technology Choice and Africa’s Green Revolution Donald F Larson, World Bank Innovation and Policy for the Bioeconomy Ravello June 18 2013

2. Overview • Theory of endogenous technology choice • Comparisons of Africa today and Asia at the start of its Green Revolution • Implications for applied agricultural research Malawi

3. Endogenous technology (Mundlak, 1988) Words Math • There is a given set of technologies suitable for a wide set of states • The state frames the firm or household decision about which one to use • Geography • Climate, soils, water, population density • Market conditions • Availability of inputs and services • Agents at farmgate, credit, contracts, transaction costs • Household characteristics • Labor, land, education, capacity to solve market constraints (self-finance, self-insure) • Consequence: a mixed set of applied technologies in any given setting • Econometric • Implication for innovation • What new more-productive technology would be chosen • Implication for rural development strategies • What instrument would lead farmers to chose a more productive technology?

4. The appeal of Asia’s Green Revolution policies for Africa: smallholder agriculture Source: von Braun (2005)

5. The appeal of Asia’s Green Revolution policies for Africa: opportunities for poverty reduction • Virtuous cycle • Agricultural productivity gains • Higher rural incomes • Reductions in rural poverty • Investments in human and physical capital in rural economy • Declining food prices • Reductions in urban poverty

6. The Asian policy model is a central pillar in most African rural development strategies • “Eighty-six per cent of staples in poor areas come from local sources, so support for country-led efforts to bolster smallholder agriculture is critical.” –Robert Zoellik, President of the World Bank, Financial Times January 5, 2011 • “Sustainable intensification of smallholder crop production is one of FAO’s strategic objectives.” Jacques Diouf, Director-General, Food and Agriculture Organization of the United Nations. Foreword to Save and Grow. FAO (2011). • “G20 Ministers of Agriculture must focus on smallholder farmers to achieve food security and prevent food price volatility” Shenggen Fan, Director General, International Food Policy Research Institute. Press Statement June 15, 2011. • “AGRA works to achieve a food secure and prosperous Africa through the promotion of rapid, sustainable agricultural growth based on smallholder farmers.” What is the Alliance for a Green Revolution in Africa, www.agra-alliance.org, downloaded June 16, 2011. • If you care about the poorest, you care about agriculture. Investments in agriculture are the best weapons against hunger and poverty, and they have made life better for billions of people.” Bill Gates, co-chair of the Bill and Melinda Gates Foundation (Gates, 2012)

7. Innovation impact of new rice varieties in Asia Pakistan Indonesia Vietnam Bangladesh

8. Climate as a source of heterogeneous states

9. Heterogeneous natural endowmentsNigeria

10. Diets as a source of heterogeneous states Because rice was the foundation of Asian diets, abundant and inexpensive rice had a large impact on household incomes and poverty. The technology was pro-poor, since rice occupied a larger than average share of the household budget

11. Land abundance as a source of heterogeneous states Boosting land productivity solved a key bottleneck in Asia The constraints of land on agriculture is mixed in Africa, but lower on average than in Asia as the Green Revolution got underway Source: FAOSTAT

12. Water, investment, inputs and markets as a source of heterogeneous states

13. What problems need to be solved by mechanical and biological innovations? • What are the constraints? • Place dependent • Endowment constraints • Market constraints • Household constraints

14. Bibliography • Binswanger, Hans and Mark R Rosenzweig. 1986. Behavioral and material determinants of production relations in agriculture. Journal of Development Studies 22(3), 503–539. • Gates, Bill. 2012. Helping Poor Farmers, Changes Needed to Feed 1 Billion Hungry. Bill and Melinda Gates Foundation. Available on the Internet at: http://www.gatesfoundation.org/media-center/press-releases/2012/02/helping-poor-farmers-changes-needed-to-feed-1-billion-hungry. • Larson, Donald F., Keijiro Otsuka , Tomoya Matsumoto and TalipKilic. Should African rural development strategies depend on smallholder farms? An exploration of the inverse productivity hypothesis. Forthcoming. Agricultural Economics. • Mundlak, Yair. 1988. Endogenous technology and the measurement of productivity. In Susan M. Capalbo and John M. Antle (eds) Agricultural Productivity: Measurement and Explanation. Washington: Resources for the Future. • Mundlak, Yair, Rita Butzer and Donald F. Larson. 2012. Heterogeneous technology and panel data: The case of the agricultural production function. Journal of Development Economics 99(1), 139-149. • Otsuka, Keijiro and Donald F. Larson. 2012. An African Green Revolution: Finding Ways to Boost Productivity on Small Farms. Dordrecht: Springer. • von Braun, Joachim, 2005. Science and technology policies for agricultural productivity and growth in developing countries (PowerPoint Presentation), Agricultural Outlook Forum 2005 32857, United States Department of Agriculture, Agricultural Outlook Forum. Available on the Internet at: http://ageconsearch.umn.edu/handle/32857.