DFID’s Agriculture and Growth evidence paper series

ID-10071316The 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.

[Read more…]