DFID’s Agriculture and Growth evidence paper series

The UK Department for International Development has recently released a series of evidence synthesis papers on agriculture and economic growth, which aim to inform decision makers. While they do not represent DFID’s policy position they summarise the evidence underpinning debates related to several topics – agriculture and growth, agriculture and poverty, agriculture and the private sector, agriculture and women, and food prices and poverty.

Agriculture is an important sector for many developing countries both now and for their future development, contributing both to economic growth and reducing rural poverty. From the evidence assessed it appears that agriculture can have a positive effect on the economic growth of a country but this effect is contingent on many context-specific factors such as the current stage of economic development and resource endowments. Strong political commitment and an understanding of the local economy are key to maximising agriculture’s contribution to economic transformation. During early stages of a country’s development evidence shows that increasing agricultural productivity and incomes from farming drive demand for non-farm sectors and wider economic growth. At later stages the commercialisation of agriculture drives demand for agro-processing industries. Throughout this process and for sustained economic growth, countries are likely to have to shift resources from agriculture to other sectors as agriculture’s share in the national economy declines.

Agriculture can have a significant role to play in reducing poverty. Since agriculture is predominantly a rural activity, where the majority of the poor live, agricultural growth can stimulate greater rural labour opportunities. DFID found that poverty reduction from growth in agriculture is on average 2 to 4 times greater than from equivalent growth in other sectors. Again context matters and policies are needed to target poverty reduction alongside agricultural development. For many people in poverty increasing agricultural productivity may be a challenge particularly where the costs of doing so are prohibitive. In such cases agricultural growth which stimulates the rural non-farm economy may be more important for reducing poverty. Evidence suggests agriculture can be one part of a broader solution to tackle poverty and DFID identify several conditions whereby agricultural development can reduce poverty:

• The domestic market is less well integrated into global trade.
• A higher proportion of increased income is likely to be spent locally and on locally-produced goods and services.
• There is an enabling environment and capacity in the local non-farm economy to increase production in response to increased demand.
• Where small-holders have capability and capacity to either increase either the scale of production or the value of the produce.

DFID also find that private sector involvement and investment in agriculture is not sufficient alone to motivate agricultural growth. But public or state control of agricultural markets is unlikely to create fair and efficient markets that serve the poor. A combination of both private and public interventions are needed although what the role of the state should be, for example, providing an enabling environment, public goods, a sound investment climate or more, is much debated. Complementary public/private partnerships are needed but their precise form, crucial in terms of mitigating each sector’s failings, will again be context-specific. Such arrangements as contract farming may provide opportunities for smallholder farmers to commercialise and access new market opportunities but frequently interact with only the relatively well-off farmers and are not a guarantee of equitable incomes. This supports both the need for targeted poverty reduction programmes and social protection by the state to complement private sector growth.

A particular question asked in one of the evidence papers is “is agricultural growth and investment good for women?” Although exact numbers are missing, women make up a large proportion of the agricultural workforce, taking on gender-specific and sometimes risky agricultural work with little of the benefits and limited access to productive resources. The paper identifies that agricultural development and male out-migration are creating new opportunities for women in agriculture but without access to such inputs as land, seeds and fertiliser many women are unable to take advantage of such opportunities and reach the same levels of productivity as male counterparts. Supporting and empowering women in agriculture and targeting interventions to boost their incomes are crucial since women’s incomes are critical in times of crisis and women in general make most of the household decisions regarding food intake, nutrition and health.

While in some cases evidence shows the direction of travel needed in others the messages are less clear. Food prices can have varied effects in developing countries with some nations being more isolated from global markets and thus more buffered against price shocks. Evidence suggests that for the majority, staple crop price increases exacerbate poverty at least for the short-term although there are those who will benefit from price increases. Interestingly net buyers of food are more likely to adapt to food price rises, through substitution, than net food sellers who would need to plan for such price changes in advance. As such, evidence seems to suggest that price stabilisation policies favour the typically wealthier sellers. Although in general public food stocks have not been found to be effective at mitigating food price increases, targeted release of food stocks might be able to help the vulnerable without major distortion to the economy. Access to land was also found to be an important factor in households being able to cope with food price shocks and even benefit from them.

DFID has covered some important topics in their papers but the evidence is far from obvious in terms of guiding decisions. Perhaps it is the nature of these issues, in particular their context-dependence, that prevents clear recommendations being available. More papers in the agriculture and growth evidence paper series are to be commissioned covering further issues.