Chapter 9

 

66  Todar Todaro/S o/Smit mith h •  Economic Development, Development, Twelfth Edition

Chapter 9 Agricultural Transformation and Rural Development

 

Key y Conc Concepts epts  Ke

This chapter emphasizes that a country’s development strategy must include plans for achieving agricultural progress and rural development, as explained in section 9.1. The major topics addressed in the chapter include: 

How to increase per capita agricultural output and productivity in order to benefit the average rural dweller and provide a sufficient supply of food for the country.

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Role of Government with respect to agriculture and poverty alleviation.

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How to transform traditional low productivity agriculture into high productivity commercial agriculture.

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Explaining why the decisions of peasant farmers are rational.

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The role of risk faced by subsistence farmers and strategies to cope with this risk.

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Explaining the role of economic and price incentives in increasing output.

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Explaining the exact meaning of rural development.

In section 9.2, progress in the agricultural (cereal yields) sector since 1960 is reviewed and Sub-Saharan Africa’s continued stagnation features prominently. prominently. In many developing countries the agricultural sector often accounts for a majority of total employment; employment; yet low productivity causes agriculture agriculture to represent a much smaller share of output. There is a fairly detailed explanation on the structure of Developing World agrarian systems systems in section 9.3. Two types of world agriculture are defined: low and high productivity. Agricultural productivity (value added/worker) and land productivity (average grain yield) is compared for some developed and developing countries as an illustration of the difference. There is also a new discussion on the categorization of world agriculture in developing countries into three dynamic categories: agriculture-based countries, transforming countries and urbanized countries where movement from one category to another is expected. Agricultural practices in Asia, Africa, and Latin America are compared and contrasted in terms of the structure of their agricultural sectors and the advantages/disadv advantages/disadvantages antages of each, while acknowledging regional disparities within regions and countries:

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Latin American agriculture is characterized by the dualistic latifundio-minifun latifundio-minifundio dio system, in which a small fraction of landowners own the great majority of cultivated land in the region. Land concentration is discussed using the Gini coefficient. Total factor productivity is twice as high on family farms as on latifundios. Latifundios under-utilize under-utilize labor, while minifundios over-utilize over-utilize labor, relative to land. The latifundio system persists partly because land ownership provides such positive externalities as social status and political power.

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Chapter 9 Agricultural Transformation and Rural Development  68 

Asian agriculture is characterized by too many people crowded onto too little land (land fragmentation). Farms tend to be small, and production is often characterized by sharecropping and tenant farming. There is a good discussion of the impact of colonial rule, money lending, and recent population growth.

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African agriculture is characterized by low productivity subsistence farming, traditional techniques, a lack of investment, shifting cultivation, and labor scarcity during the peak agricultural season. Though traditionally land has been less scarce in Africa, population growth has caused land to become more scarce, and production has been shifting towards small owner-occupied plots, as opposed to communal shifting cultivation.

Section 9.4, the section on the role of women, points out that, although women perform a majority of the work inside and outside of the home in the rural regions, development programs have often targeted men. In addition, recent research indicates that the contribution of men and women to family income leads to different expenditure outcomes. Women spend more on children’s health and education compared to men, which yields larger social returns. Also, reallocating inputs, including training and credit access to women and their plots has a major impact on the productivity and the incomes of women. Section 9.5 on the economics of agricultural development, includes an extensive discussion of the transition from subsistence farming to diversified and partially commercial farming, and to specialized commercial farming. Key topics include: 

Identifying characteristics of subsistence farming. For example, risk aversion may lead poor peasants to resist new techniques that offer higher average yields because the variance of the yield may be larger. The relationship between risk aversion and sharecropping is discussed. Interlocking factor markets and monopoly and monopsony power are mentioned.

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Identifying characteristics of the transition to mixed farming.

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Identifying characteristics of modern commercial farming. Technology plays a major role at this stage. An example of the importance of shared learning and technology is given, focusing on pineapple farms in Ghana.

Section 9.6 covers strategies for a comprehensive program of agricultural and rural development. The discussion covers the role of technology, pricing policy and other economic incentives, land reform possibilities,, and supportive policies. possibilities The chapter concludes with a case study on women farmers in Kenya has been revised to reflect current developments.

 

 Lecture Suggestions

A good place to start lecturing on this topic is with a review of the performance of the agricultural sector in less developed countries over the past 40–50 years. The urban bias of many development policies can also be reviewed. This is closely connected with an emphasis on why rural sector development is as important as urban sector development: 

The majority of the population often lives in the rural sector, especially the poor.

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69  Todar Todaro/S o/Smit mith h •  Economic Development, Development, Twelfth Edition 

Industrial jobs (formal sector jobs) are in limited supply.

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Demand creation in the rural sector is important.

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The rural sector is a source of many development problems discussed in other chapters including poverty, migration, unemployment, income inequality, and population growth.

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The rural sector can be an important source of labor, food, and foreign exchange.

It is important to discuss the structure of production in the agricultural sector of different geographic regions. This is important in terms of thinking about the most appropriate polices to use for encouraging development of the rural sector. By way of summary, the pros and cons of alternative agrarian systems can be explored with a table showing the different structures of production and what the implications are for some of the important issues: 

minifundio, family farms, and Production Structure: plantation/latifundio, sharecropping, minifundio, cooperatives.

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 Issues: technical efficiency, allocative efficiency, financial incentives, economics of uncertainty,

incentives to produce for local needs, distribution, values of modernity, contributions to the modern sector, and delivery of social services. Some evidence suggests that successful successful agrarian systems as divers diversee as those in South Korea, Taiwan, and China have been converging toward a hybrid, with family farming and cooperative features. Farming in South Korea is among the most efficient in the developing world, and its Saemaul Undong (“new village movement”) movement”) rural development program makes makes for an excellent discussion. (Information can easily be found online. For example, Edward P. Reed’s “Is Saemul Undong a Model for Devleoping Devleoping Countries Today?” The program aims to create a “development clim climate” ate” through a philosophy of “diligence, self-help, and cooperation,” by maintaining individual family private ownership of land while at the same time emphasizing the role of collective action of villagers in developing infrastructure and raising income and welfare. The efforts to privatize and deregulate the ejidos (commons) sector in Mexico is also a good and lively discussion topic. The development of the agricultural sector in the current less developed countries can be compared to the now developed countries in their earlier stages when productivity in agriculture kept pace with the industrial revolution, and land reform often occurred. This can be a good lead for a land reform discussion. The external benefits of being a big landowner often explain why land reform is politically hard to implement. At the same time, the experience of Brazil shows that the lack of land reform is leading poor farmers to attempt to occupy land owned by latifundios. The discussion on low versus high productivity agriculture agriculture can be made more technical depending on the background of the students. 

Students with intermediate micro may find interesting a Tobin-Markowitz Tobin-Markowitz indifference map diagram to illustrate the choice of a low-yield variety “Indica rice” over a new high-yield variety “super-rice,” and an illustration of under-utilization of intermediate inputs and capital on a factor productivity diagram from an expected utility maximization perspect perspective. ive.

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The importance and impact of an increase in the quantity of capital and/or technology can be reviewed. You may start with the Malthusian model where labor is the only factor and discuss the subsistence level of living concept. Appropriate technology can also be discussed.

Policy options are numerous and include the provision of public capital infrastructure, research and development, extension services, input access, transportation, marketing, and storage, and price and exchange rate policies. Some of these are discussed in the case study of women farmers in Kenya at the end of the chapter. For example, an overvalued exchange rate can hurt agricultural exports. With respect to price controls, note that price plays three important roles: crop choice, urban cost of living, and farm income. Access to information may also be discussed. There may be many opportunities that poor peasant farmers are not aware of, such as growing high-end organic products for the developed countries.

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Additional sources of lecture material are: Pranab Bardhan. Land Labor and Rural Rural Poverty. Oxford 1984 (for example his chapter on

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interlocking factor markets). Ester Boserup. Population and Technological Change, University of Chicago Press, 1981.

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Ester Boserup. The Conditions of Agricultural Agricultural Growth, George Allen and Unwin Ltd Ghatak and Ingersent. Agriculture and Economic Economic Developmen Development  t . Johns Hopkins 1984.

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Idriss Jazairy, Mohiuddin Alamgir, and Theresa Panuccio. The State of World Rural Poverty: an  Inquiry into its Causes Causes and Consequences Consequences. Published for the International Fund for Agricultural

Development. NYU Press 1992. Michael Lipton. Why Poor People Stay Poor: A Study of Urban Bias in World Development . London:

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Maurice Temple Smith 1977. Gerald M. Meier.  Leading Issues in Economic Developm Development  ent . Oxford University Press 1995.

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This chapter also lends itself to illustration from current events. Land reform is a very controversial issue. For details on the experiences of both South Korea and Taiwan you should consult both Wade’s Governing the Market  as  as well as Powelson and Stock’s The Peasant Betrayed: Agriculture and Land  Reform in the Third Third World . The MST movement (at http://www.mst.org.br , with links to pages in various

languages) is a good example to illustrate the struggle for land in Brazil. The role of women is another issue that can be illustrated by reference to current events drawing attention to the unequal work burden in rural areas of many developing countries.  Discussion Topics Topics: The students should now know enough from earlier chapters to allow for some

interesting discussions. discussions. This is a good time to get them to try to integrate the different development problems into policy options. Land reform: Present some background information, information, or have students do independent reading and

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research on selected countries before class. Discuss the pros and cons of land reform. 

Urban bias and the role of government policy with respect to the agriculture sector. Policy options: After identifying structural constraints and other data on the agricultural sector’s

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performance in many developing countries, see what sort of policy options the students can come up with.

 

 Sample Questions

Short Answer 1. Explain Explain the conc concept, ept, goals, goals, and methods methods of integrat integrated ed rural develop development ment.. Answer: A solid answer will usually be based on the section, “Toward a Strategy of Agricultural

and Rural Development,” in the text. 2. What are the the primary determ determinan inants ts of agricultura agriculturall labor product productivity ivity?? ©2015

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Chapter 9 Agricultural Transformation and Rural Development  72

Answer: See the section on the economics of agricultural development.

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3. Explain the the case for land reform in Latin America. Are there any potential potential negative negative effects? What steps could be taken to address these effects? Answer: The goal would be to increase productivity, and reduce poverty and inequality. Peasants

must be prepared with technical and business skills. Incentives must be offered to keep competent large farmers in business. Possibility (very real) of conflict and resistance from large landowners. 4. What are the the implications implications for a successful agricultural development strategy of the finding that women perform 60 to 90% of all work in the traditional rural areas? Answer: Agricultural extension programs programs and access to small scale credit must be focused on

women. 5. In Bangladesh, Bangladesh, the government government guarantees guarantees rice farmers farmers that it it will buy rice at a specific specific price. Explain Explain the costs and benefits to farmers in good and bad harvest years. Answer: Supply and demand analysis with reference to elasticities plus a discussion of risk aversion

is called for. 6. Describe briefly briefly five major characteristics characteristics or problems problems of developing countries’ agricultural sector. Make reference to specific countries or regions where you can. Answer: Answers may be expected to vary according to lecture topics, and might include a

discussion of land ownership, available inputs, credit access, training program, etc. 7. Explain the the role of risk and uncertainty in an analysis analysis of the economic behavior of peasant farmer farmers. s. What kinds of questions does this analysis enable us to answer? Answer: Answers may be expected to vary according to lecture topics, with some discussion of why

peasant production decisions are rational. See the section in the text that discusses sharecropping. 8. Critically evaluate evaluate the following sstatement: tatement: Government policies to keep the price price at w which hich staple foods are bought and sold low helps to reduce poverty and inequality. Answer: Students must consider negative effects on rural areas.

9. Is sharecrop sharecropping ping economi economically cally effici efficient ent or ineffici inefficient? ent? Explain Explain Answer: See the section in the text.

10. What are the the key characteristics characteristics of of the agrarian agrarian system in Asia that distinguish distinguish it from that of Latin America? Explain your answer. Answer: Land fragmentation, greater population density and absentee landlords.

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11. Women bea bearr a disproportionate disproportionate burden burden in the the agrarian system of of Sub-Saharan Africa, Africa, Asia and and Latin America. In addition their productivity is low. Explain these statements with specific examples from individual developing economies. economies. What measures/policies have been implemented to deal with these two issues? Once again discuss with specific examples from individual developing economies. Answer: Discussed in the section on the role of women in agriculture. Specific policies aimed

at raising female agricultural productivity include facilitating access to credit, training programs, providing titles to land as a way of securing property rights (and thus the possibility of borrowing), cash subsidies in exchange for sending children (especially girls) to school etc. 12. What is (ar (are) e) the key characteri characteristic stic(s) (s) of the agrarian agrarian sys system tem in Sub-Sahara Sub-Saharan n Africa Africa?? Answer: Lack of complementary inputs (mechanical power, irrigation, tools, seeds, fertilizer),

shifting cultivation, cultivation, labor scarcity during the harvesting season while surplus labor during the rest of the year, rights of the extended family to land and water. 13. What are ssome ome of the specific policies aimed aimed at improving improving the the productivit productivity y of w women omen farmers in Kenya? Answer: Discussed in the case study to the chapter.

14. What is the Alliance Alliance for a Green Revolution Revolution in Africa Africa and who who are its its primary supporters? Answer: Disc Discus usse sed d on Page Page 4 443 43

15. What role should the the government government play with respect to the agricultural sector sector in developing countries countries in their attempt to alleviate poverty? Answer: Discussed on Page 446-447

 

 Multiple Choice

1. Crops produced produced entire entirely ly for the the ma market rket are are known known as (a) (a) ba basi sicc crop crops. s. (b) (b) mixe mixed d ccro rops ps.. (c) (c) hy hybr brid id crop crops. s. (d) (d) ca cash sh crop crops. s. Answer: D

2. An agr agrari arian an sys system tem refers refers to (a) the patt pattern ern of land land ownership. ownership. (b) the the typ typee of crops crops grow grown. n. (c) the process processing ing of agricul agricultural tural commod commodities ities.. (d) an econom economy y that has no no industry industry..

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Answer: A

3. The primary primary goal goal of an agricul agricultural tural extensi extension on service service is to to (a) bring bring new areas unde underr cultiva cultivation tion.. (b) increase increase the yield yield per h hectare ectare.. (c) introd introduc ucee land land refor reform. m. (d) assist assist rruralural-urban urban migratio migration. n. Answer: B 4. Which of the following following is an importan importantt factor in the success of agrarian land reform policies? (a) the introd introducti uction on of shar sharecropp ecropping. ing. (b) the introd introducti uction on of ttenant enant farming. farming. (c) farme farmerr trai trainin ning g program programs. s. (d) the introduct introduction ion of more capital capital intensive intensive methods. methods. Answer: C

5. It is important important to place particular particular stress on on the ro role le of women women in rural development development programs programs because (a) women women have rreceiv eceived ed less less training training in the the past. past. (b) women women perfor perform m a large majority majority of the work work in the rural sector. sector. (c) women tend to allocate more resources to their children’s health health and education. (d (d)) all all of the the aabo bove ve.. Answer: D

6. Sharecroppi Sharecropping ng can be be best best unders understood tood as (a) a type of agreeme agreement nt preferre preferred d by pe peasan asants. ts. (b) a type of of agreement agreement prefer preferred red by landlo landlords. rds. (c) a compromise compromise between between peasant peasant and landlord landlord prefere preferences. nces. (d) a type of of agreement preferred by neither but given by tradition. Answer: C

7. A program program through through which new ideas, ideas, methods methods,, and advice are offered offered to farmers farmers to incre increase ase farm yields is known as (a) agricu agricultu ltural ral ext extens ension ion.. (b) agricultu agricultural ral mechaniza mechanization tion.. (c) an agr agrari arian an sys system tem.. (d (d)) land land refo reform rm.. Answer: A

8. In South Asia and Sub-Saharan Africa, Africa, about what what share of of the labor labor force works works in agriculture? agriculture?

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(a) (a) One One ten tenth th.. (b)) One (b One thi third rd.. (c) (c) One half alf. (d) (d) Two Two thir thirds ds.. Answer: D

9. In South Asia and Sub-Saharan Africa, Africa, about what what share of of output is contributed contributed by agriculture? agriculture? (a) (a) One One ten tenth th.. (b)) One (b One fi fift fth. h. (c) (c) Two Two fift fifths hs.. (d)) One (d One h hal alf. f. Answer: B

10. In which of these developing regions has food production production per capita capita steadily fallen over the last quarter century? (a) (a) Afri frica. ca. (b)) Ea (b East st Asi Asia. a. (c) (c) So Sout uth h Asi Asia. a. (d) (d) Lati Latin n Ameri America ca.. Answer: A

11. In a wor world ld of perfect certainty, sharecropping sharecropping would would be less less efficient than a farm owner working his his own farm because (a) sharecrop sharecroppers pers receive receive only h half alf of their margina marginall produc product. t. (b) paying a worker a wage wage gives him or her an incentive incentive to shirk. (c) sharecrop sharecroppers pers are are exploited exploited by by landlords landlords.. (d) renting renting farmland farmland con concent centrates rates risk risk on the rente renters. rs. (e) (e) all all of of th thee ab abov ove. e. Answer: A

12. During the 1990s, food production increased faster than population population in all regions of the developing world except (a) Latin America. (b)East Asia. (c) Sub-Saharan Africa. (d)none of the above. Answer: C

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13. The A Africa frican n agrarian agrarian system system is characteri characterized zed by by (a) absent absentee ee landlo landlords rds.. (b) a dual agrarian system known as latifundio-minifu latifundio-minifundio. ndio. (c) land land ffrag ragmen mentat tation ion.. (d) shift shifting ing cultiv cultivati ation. on. Answer: D

14. The system system of land ttenure enure in which which tenant tenant farmers farmers pay a fixed sh share are of their their crop to landowners landowners is is called (a) commun communal al farmin farming. g. (b) collec collectiv tivee far farmin ming. g. (c) latifundi latifundio-mi o-minifun nifundio dio system. system. (d) sharec sharecrop roppin ping. g. Answer: D

15. Abse Absentee ntee la landow ndowners ners charact characterize erize the the agrarian agrarian system system of  of  (a) Asia. (b (b)) Lati Latin n Amer Americ ica. a. (c) Sub-Sa Sub-Sahar haran an Afr Africa ica.. (d (d)) all all of the the aabo bove ve.. Answer: A

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