Using agriculture for development: Supply- and demand-side approaches

For most poor countries of today, using agriculture for development is widely recognized as a promising strategy. Yet, in these countries, investment in agriculture has mostly been lagging relative to international norms and recommendations. Current wisdom on how to use agriculture for development is that it requires asset building for smallholder farmers, productivity growth in staple foods, an agricultural transformation (diversification of farming systems toward high value crops), and a rural transformation (value addition through rural non-farm activities linked to agriculture). This sequence has too often been hampered by extensive market and government failures. We outline a theory of change where the removal of market and government failures to use this Agriculture for Development strategy can be addressed through two contrasted and complementary approaches. One is from the “supply-side” where public and social agents (governments, international and bilateral development agencies, NGOs, donors) intervene to help farmers overcome the major constraints to adoption: liquidity, risk, information, and access to markets. The other is from the “demand-side” where private agents (entrepreneurs, producer organizations) create incentives for smallholder farmers to modernize through contracting and vertical coordination in value chains. We review the extensive literature that has explored ways of using Agriculture for Development through these two approaches. We conclude by noting that the supply-side approach has benefited from extensive research but met with limited success. The demand-side approach has promise, but received insufficient attention and is in need of additional rigorous research which we outline

How experimental research in agriculture has gone from lab to field

Agriculture has a long tradition of randomized experiments in the research station and of comparative demonstration plots under scientist control. The BDK Nobelists have pioneered randomized field experiments under agency control to fight global poverty, thus making behavior, contextual circumstances, and institutional constraints key determinants of outcomes. In agriculture, experimentation has massively responded in jumping the fence from lab to field, with already major advances as to how to better use agriculture for development. We document how this has happened and how the methodology of field experiments has to be adapted to perform in the challenging context of developing country agriculture

The Triple Crisis: What Development Prospects for Africa?

Africa, Triple Crisis, Development, WIDER 25 Anniversary

Toward a Territorial Approach to Rural Development

This paper explores a territorial approach to rural development in Latin America. It first reviews evidence that progress in rural social development has not been accompanied by reductions in income poverty and inequality. It then assesses qualitative changes that have occurred in rural incomes and the emergence of new opportunities for rural poverty reduction and draws implications for the potential of a territorial approach to rural development. Recent experiences with territorial approaches are briefly reviewed and lessons extracted for the implementation of such an approach. It concludes with a series of recommendations for implementation of a territorial approach to rural development.rural development, rural poverty, territorial approach, inequality, Latin America, Community/Rural/Urban Development, O10, O13, O15, O18,

Is a friend in need a friend indeed? Inclusion and exclusion in mutual insurance networks in southern Ghana

Mutual insurance has been shown, theoretically and empirically, to be incomplete and limited by asymmetric information and lack of enforcement mechanisms. While some research has shown that networks based on kinship, neighborhood and ethnicity may provide a locus of insurance and thus a way of overcoming these problems, these studies are not fine enough to predict the inclusion and exclusion of individuals. Using data from rural Ghana, we examine the role of social relations in obtaining assistance in the face of shocks. We examine this at both the intra-household and community levels. At the household level, asking for and receiving assistance from the spouse is related to gender, the quality of the marital relationship, and the wealth of household members. At the community level, asking for and receiving help are correlated with membership in a major lineage, participation in secular organizations, the individual¿s fostering history, and anticipated land inheritance. We also show that these factors differ depending on whether the shortfall was for a household or personal item (as perceived by the respondent). This work helps us to identify individuals who are more likely to fall outside of mutual insurance networks and require interventions to help them cope with ris

Flourish or Fail?: The Risky Reward of Elite High School Admission in Mexico City

Admission to an elite school imposes substantial risks on many students while offering modest academic benefits relative to admission in their most preferred nonelite school. Using variation in school assignment generated by the allocation mechanism, we find that admission to a system of elite public high schools in Mexico City increases the probability of high school dropout by 9.4 percentage points. Students with weaker middle school grades and whose commutes are lengthened by elite admission experience a larger rise in dropout probability. On the other hand, elite admission raises end-of-high-school math test scores for the marginal admittee, even when accounting for potential bias due to admission-induced dropout

Subsidy policies and insurance demand

Using data from a two-year pricing experiment, we study the impact of subsidy policies on weather insurance take-up. Results show that subsidies increase future insurance take-up through their influence on payout experiences. Exploring mechanisms of the payout effect, we find that for households that randomly benefited from financial education, receiving a payout provides a one-time learning experience that improves take-up permanently. In contrast, households with poor insurance knowledge continuously update take-up decisions based on recent experiences with disasters and payouts. Combining subsidy policies with financial education can thus be effective in promoting long-run insurance adoption

Cash transfer programs with income multipliers

Cash transfer programs induce multiplier effects when recipients put the money they receive to work to generate additional income. The ultimate income effects are multiples of the amounts transferred. This paper analyzes the PROCAMPO program in Mexico, which was introduced to compensate farmers for the anticipated negative effect of the North American Free Trade Agreement (NAFTA) on the price of basic crops. The transfer rules and the timing of the panel data collected allow unique control of biases in this impact analysis. We find that the multiplier among ejido sector recipients is in the range of 1.5 to 2.6. Multipliers are higher for medium and large farm households, low numbers of adults in the household, nonindigenous backgrounds, and households located in the Center and Gulf regions. High multipliers reflect marginal income opportunities that were unrealized due to liquidity constraints that the transfers eased. Opportunities came from the asset endowments that these households have, particularly irrigated land, and these opportunities were enhanced by access to technical assistance.Subsidies Mexico ,income ,

The supply and demand side impacts of credit market information

We utilize a unique pair of experiments to study the precise ways in which reductions in asymmetric information alter the outcome in a credit market. We formulate a general model in which the information set held by lenders, and what borrowers believe their lenders to know, enter separately. This model illustrates that non-experimental identification of the supply- and demand-side information in a market will be confounded. We then present a unique natural experiment, wherein a Guatemalan credit bureau was implemented without the knowledge of borrowers, and subsequently borrowers were given a randomized course describing the existence and workings of the bureau. Using this pairing of randomized and natural experiment, we find that the most powerful effect of new information in the hands of lenders is seen on the extensive margin, in their ability to select better clients. Changes in contracts for ongoing borrowers are muted. When borrower in group loans learn that their lender possesses this new information set, on the other hand, we see strong responses on both the intensive margin (changes in moral hazard) and the extensive margin (groups changing their composition to improve performance). We find some evidence that disadvantaged and female borrowers are disproportionately impacted. Our results indicate that credit bureaus allow for large efficiency gains, that these gains are augmented when borrowers understand the rules of the game, and that economic mobility both upwards and downwards is likely to be increased.

Is a Friend in Need a Friend Indeed? Inclusion and Exclusion in Mutual Insurance Networks in Southern Ghana

Mutual insurance has been shown, theoretically and empirically, to be incomplete and limited by asymmetric information and lack of enforcement mechanisms. While some research has shown that networks based on kinship, neighborhood and ethnicity may provide a locus of insurance and thus a way of overcoming these problems, these studies are not fine enough to predict the inclusion and exclusion of individuals. Using data from rural Ghana, we examine the role of social relations in obtaining assistance in the face of shocks. We examine this at both the intra-household and community levels. At the household level, asking for and receiving assistance from the spouse is related to gender, the quality of the marital relationship, and the wealth of household members. At the community level, asking for and receiving help are correlated with membership in a major lineage, participation in secular organizations, the individual's fostering history, and anticipated land inheritance. We also show that these factors differ depending on whether the shortfall was for a household or personal item (as perceived by the respondent). This work helps us to identify individuals who are more likely to fall outside of mutual insurance networks and require interventions to help them cope with risk.Risk, social setworks, sutual insurance, intrahousehold allocation.