Agricultural Technology, Productivity, and Poverty in Madagascar

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Agricultural Technology, Productivity, and
Poverty in Madagascar

• Bart Minten
• Chris Barrett
• February 2006

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Presentation Outline

• Introduction
• Conceptual framework
• Data and methodology
• Descriptive statistics
• Price and real wage effects
• How to improve agricultural performance?
• Simulated impacts of alternative policy
  interventions
  
• Conclusions

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1. Introduction

• Most of the poor (in Madagascar) lives in rural
  areas
  
• Most of the rural poor are employed in
  agriculture, sometimes as farmers, sometimes as
  agricultural laborers, sometimes both.
  
• All the poor eat. So all are consumers. Many
  poor producers are actually net buyers .
  
• Because the poor are both consumers and (often)
  producers, sometimes wage laborers, the effects
  of agricultural technology adoption and
  productivity improvements on the poor follow
  multiple pathways.
• Need to trace out these various pathways.

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2. Conceptual framework

• Three sub-populations
• Net food sellers
• Net food buyers
• Unskilled workers

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2. Conceptual framework

• Three pathways through which exogenous changes in
  agricultural productivity affect the poor
  
• Effects on prices. In isolation, price effects
  of productivity improvements benefit only net
  food buyers.
  
• Effects on incomes through farm profits if
  output expands faster than prices fall, net food
  sellers gain.
  
• Effects on real wages through induced change in
  labor demand and prices if MRPL increases,
  employment and wages increase, benefitting
  unskilled workers.

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3. Data and methodology

• Data sources
• 2001 Commune census (Cornell/FOFIFA/INSTAT)
• 2001 National household survey, EPM (INSTAT)
• 1993 Population census (INSTAT)
• Secondary geographic data on climate, soils,
  altitude (various Malagasy sources)
  
• We take communes (N1392) as unit of analysis and
  rice as the focal crop.
  
• Use regression analysis with Conley correction
  for spatial autocorrelation and
  heteroskedasticity and prospective endogeneity of
  key regressors.

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4. Descriptive statisticsNet marketable rice
surplus and poverty
The relationship between household marketable
rice surplus and poverty is weak because of
occupational choice (rich less likely to be rice
farmers).
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4. Descriptive statistics Agricultural wage
rates (FMG/day)
There exists a strong inverse relation between
wages and poverty indicators within/between
provinces in Madagascar.
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Percentage of population who are food insecure
4. Descriptive statistics
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Duration of annual soudure
4. Descriptive statistics
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5. Price and real wage effectsDeterminants of
poverty/food insecurity

• Results
• Doubling rice yield lowers food insecure by 38
  and shortens lean period by 1.7 months
  
• Presence of cash crops reduces poverty
  indicators
  
• Remoteness increases poverty 1st-5th quintile
  means 10 more food insecure and 0.7 months
  longer lean season

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5. Price and real wage effectsProductivity and
prices

• Rice yields Yield elasticity of price
• 31-45 (18-26) in harvest (lean) periods
• Remoteness reduces harvest period prices and
  raises lean period prices (hurts both net buyers
  and net sellers)
  
• Seasonal harvest concentration reduces prices,
  especially in lean season (30-50)
  
• Physical insecurity drives prices down,
  especially in harvest period
  
• Cash crop presence drives up rice prices

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5. Price and real wage effectsProductivity and
real wages

• Rice yields doubling rice yields, increases real
  wages 65-89.
  
• Coefficient estimates on prices and wages imply
  induced labor demand during growing season
  (difference between OLS and IV estimates)
  
• Cash crops increase real wages
• Remoteness negative effect, especially in
  harvest period
  

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5. Price and real wage effectsSummary

• Increasing rice yields has a strong, positive
  effect on food security among all the poor
  
• Rice prices fall 18-45, benefitting net buyers
• Output increases faster than prices fall,
  benefitting net sellers (capture 10-60 of
  productivity gains)
  
• Labor demand and real wages increase 65-89,
  benefitting unskilled workers.
  
• Remoteness hurts everyone (lower harvest period
  prices for net sellers, higher soudure prices for
  net buyers, lower real wages)
  
• Cash crops ambiguous results help unskilled
  workers and net sellers but hurt net buyers
  (i.e., small rice farmers)
  

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6. How to improve agricultural performance?Rudim
entary production systems

• Very low rates of adoption of chemical fertilizer
  (6), organic fertilizer (36), improved seed
  (10), SRI, etc.
  
• Given strong positive effect of these agronomic
  enhancements on rice yields and the positive role
  rice yields play in advancing food security, key
  policy question is
• How to stimulate greater uptake and increase rice
  yields?

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6. How to improve agricultural performance?Direc
t and indirect effects on rice yields

• Strong, positive direct effects on rice yields
  from fertilizer, improved seed, SRI, improved
  NRM, agricultural equipment, livestock, and
  irrigation.
• Strong, positive indirect effects on rice yields
  via induced uptake of agricultural
  intensification technologies through
  irrigation, access to markets, and literacy.

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7. Simulated effects of alternative
policy interventions
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7. Conclusions

• Adoption of improved agricultural technologies
  so as to increase rice yields and demand for
  unskilled agricultural labor aids all types of
  the rural poor and food insecure
• Net sellers
• Net buyers
• Unskilled workers

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7. Conclusions

• No magic bullet nor striking new approach
• Stimulating agricultural productivity
  improvements and improving rural market access
  are familiar tasks with high payoff in terms of
  broad-based poverty reduction.
• Need long-term commitment to rural and
  agricultural development based on technological
  change.

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