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Learn how agriculture boosts income, reduces migration, and impacts population growth. Understand the roles of demand and supply, historical growth patterns, Green Revolution generations, and productivity gaps.
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Lecture 14Don 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 • 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
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 ?
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
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
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
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
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
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
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
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
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
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
Policy Issues • Would land redistribution • raise output ? • lower output ? • increase equality ? • lead to more democracy or violence ?