1. The comparative evidence shows that agriculture-led growth strategies have rarely succeeded on their own and usually require strong urban demand or high agricultural prices to drive productivity gains. In Ethiopia, these conditions are currently lacking.
2. For agriculture to drive growth in Ethiopia, it would need sustained high prices to incentivize productivity increases. However, the country's isolation makes prices volatile and difficult to stabilize. Agricultural growth alone also cannot generate sufficient urban income growth to continuously drive demand.
3. Agricultural productivity gains in Ethiopia face constraints including inadequate seed systems, underdeveloped input markets, low returns from fertilizer use without improved seeds, and limitations of the input credit system. Faster urban-led growth is now needed
08448380779 Call Girls In Greater Kailash - I Women Seeking Men
Beyond Agriculture: Urban Growth Can Drive Ethiopia's Development
1. Beyond Agriculture: A Greater Role
for Urban Industrial Growth?
Stefan Dercon
University of Oxford
and International Growth Centre
2. Background
“In Search of a Strategy: Rethinking Agriculture-led
Growth in Ethiopia”
• Started from a key question:
“how to achieve faster growth through commercialization
of agriculture, with emphasis on cereals”
• Turned into two questions:
– How to get growth in agriculture?
– The role of agriculture in overall growth in the economy?
• Focus on grains, less on non-food crops and livestock.
• Attempt at consolidation
3. Method
• Theory revisited
• Meta-analysis on evidence
– Relevant comparative evidence from other
settings
– Critical review of evidence on Ethiopia
• Changed my mind on many points during
course of this work.
4. We know what is at stake:
Iron Law of Economic Development
Ethiopia
Percent of
Pop’n in Ag.
Sector
US and other OECD nations
Income per Capita Data from the
World Bank
6. Transformation Path
China in 20 years:
Percent of from 80% to 55% in agriculture
Pop’n in Ag.
Sector
Income per Capita
7. Looking for growth…
• Our interest: growth, i.e. not just 20% more
GDP, but a process in which gains multiply
themselves....
• In a rare economy: one that has stuck to a
reasoned strategy, ADLI, for 15 years,
including some new incarnations (PASDEP); a
version of ‘agriculture first’
• I will take a critical look at this (with some
credentials)
8. Agriculture first
• Rational case
• Story about high returns and linkages and multipliers
from initial agricultural productivity increases
• Resulting in high growth and poverty reduction,
• Based on current and historical evidence
• Emotive case
• Political economy case
9. Key lessons
• Growth in the urban economy is now
ESSENTIAL in Ethiopia to achieve faster
growth in agriculture and faster poverty
reduction. The conditions in Ethiopia are not
right for an agriculture first strategy.
• Current growth strategy in agriculture has
positive parts but necessary elements are just
plain missing.
10. Structure
1. Revisit the comparative evidence
2. Agriculture first in Ethiopia: prices and
linkages
3. Agricultural constraints on the agricultural
transformation
11. Recent evidence
• Massive growth in output
+100% since 1996/97, +12% per year in last 5 years
+200% wheat, +150% maize, 60% teff, 80% sorghm
• Huge area expansion
+44% since 1996/97, +5% per year in last 5 years
+85% wheat, +70% maize, 20%teff, 60% sorghum
• Strong yield increase
+40% since 1996/97; +6% per year in last 5 years
+60% wheat,50% maize, +30% teff, 13% sorghum
12. The area expansion?
• Area cultivated (cereals) per dweller constant
since 1980!
• PASDEP forecasted 1% area growth in last 5
years, almost a third more
• Where does this land come from?
13. Table 3: Modern Input Use 1997/98-2007/08 on Cereals
Source: Calculations from Seyoum Taffesse (2008) using CSA data (CSA (September 1998), CSA (July 2003b), and CSA (August 2008 )) for all cereals.
The yield expansion
• Not easily explained by inputs
2007/08 2001/02 1997/98
Fertiliser Applied area (share in total area cultivated - %) 39.0 42.8 32.3
Fertiliser application (total quintals/ total hectares) 0.45 0.30 0.37
Fertiliser application (quintals per hectare of fertiliser 1.16 1.00 1.15
applied area)
Improved seed applied crop area (% of crop area) 4.7 3.5 2.4
Pesticide applied crop area (% of crop area) 20.8 10.8 12.0
Irrigated crop area (% of crop area) 1.1 1.3 0.6
Extension package covered crop area (% of crop area) 14.5
14. Table 4: Percentage Yield Gap of Ethiopia compared to selected countries in selected years
Source: FAOSTAT data up to 2007. Data for 2008 are from FAO (2009) for Ethiopia compared to 2005-07 for other countries. LDC and Landlocked LDC are less developed
countries and the least developed countries that are landlocked (all based on FAO definitions).
The international comparison
Maize Wheat Cereals (FAO definition)
93/03 05/07 08 93/03 05/07 08 93/03 05/07 08
Kenya 0% 30% 34% -32% -15% -2% -25% -10% 10%
Malawi 20% 59% 64% 89% 28% 47% -1% 29% 34%
Tanzania 46% 108% 115 -3% 47% 68% 15% 58% 63%
Uganda 1% 54% 59% -27% 6% 21% -15% 20% 24%
India -8% 16% 20% -50% -30% -20% -48% -37% -23%
China -67% -57% -55% -65% -59% -53% -65% -59% -53%
Vietnam -37% -37% -35% -67% -61% -60%
USA -80% -75% -74% -51% -32% -21% -76% -72% -71%
LDC 35% 66% 71% -9% 3% 18% -11% 5% 8%
15. The fastest green revolution in history?
• Or something is going wrong with the data?
• In 5 years, wheat yield growth of 50%+, faster
than ever recorded in China or India (but still
below 120% target in PASDEP)
• An appeal to transparent auditing procedure!
16. Structure
1. Revisit the comparative evidence
2. Agriculture first in Ethiopia: prices and
linkages
3. Agricultural constraints on the agricultural
transformation
17. 1. Revisit the comparative evidence
• Perceived wisdom:
– Growth in predominantly agricultural economy
has to start in agriculture
• English Story
• East-Asian miracle
• WDR 2007
18. Revisiting the evidence...
• England, France (history): key stimulus for agricultural
productivity growth in 17th -19th century came from high urban
demand;
• Vietnam, China, India: agriculture played a role but not
key/sole driver of growth. In all cases strong incentives were
present to increase productivity:
– Vietnam: underused HYV given excellent agro-climatic (and irrigation)
potential;
– China: very strong price incentives in early 1980s;
– Green revolution India and other countries: HYV rice (IR8) offering 5 times
yield using standard practices and 10 times yield with irrigation/fertiliser
mix; for wheat also multiple of yield on offer. Even then, it took many
years to realize doubling of yields in rice and other crops.
– Against this: Philippines – new technologies in 1960s but no rise in
incomes, as rice price declined and no agricultural transformation
19. Conclusion?
• Not quite simply ‘agriculture first’
• Technology adoption/changing practices occur
not in a vacuum, but require high economic
returns
– Either massively high productivity technologies/
practices
– Or sustained high prices, requiring high demand
20. Structure
1. Revisit the comparative evidence
2. Agriculture first in Ethiopia: prices and
linkages
3. Agricultural constraints on the agricultural
transformation
21. 2. Questioning agriculture first
• Technology availability?
– Some, but not with massive returns
• E.g. Maize: 56% for improved seeds/practices/fertilizer
relative to traditional practices/seeds (2001)
– Would require sustained high prices to offer high
returns
22. 2. Questioning agriculture first...
• Prices: economy-wide interactions
– Ethiopia, land-locked with high transactions costs to
borders
– Implication: for wide range of prices, as if closed
economy (non-tradable for wide range)
– So tricky food price balance:
• not too high to stifle growth in rest of economy,
• not too low to stifle innovation and growth in agriculture
• Only limited stabilisation offered by international markets,
with output increases rapidly undermining incentives (e.g.
maize in 2001/02)
23. Figure 1: Import and export parity, and wholesale prices for wheat (Addis Ababa), January 1998 to November 2008
24.
25. 2. Questioning agriculture first...
• Incentives for cereal agricultural growth would
require urban income growth to sustain
demand for cereals.
• Can this urban income growth simply stem for
higher rural incomes or higher rural
production? No...
= (forward) production linkages (but ?)
= low consumption linkages (marginal budget share
for cereals 19%, other food 22%, ind goods 22%)
26. Conclusion 2
• In Ethiopia:
– No ‘golden eggs’ in technology
– Requiring high incentives for productivity growth
– In turn requiring processes of urban growth
– Which agricultural growth cannot deliver
• Corroborates with other evidence:
– For African standards, very small gap between
rural and urban poverty, with latter creeping
closer over time.
27. Conclusion 2
• Agriculture not first is not the same as
agriculture last:
– Agricultural growth will remain essential part
• ‘Commercialisation’ essential but
– Is not just supply plus markets (traders etc)
– Requires demand growth to increase and sustain
demand
– Requires agricultural strategy that pays more
attention to economic returns (not just yields) and
the complementarity of urban economic growth.
28. Structure
1. Revisit the comparative evidence
2. Agriculture first in Ethiopia: prices and
linkages
3. Agricultural constraints on the agricultural
transformation
29. 3.1 Inputs...
• If high productivity gains exist, it is for
‘packages’ of fertilizer, seeds, practices...
• But meanwhile
– about 40% cereal area using fertilizer but only 5%
improved seeds
– Fertilizer dominating agenda
– Extension efforts not properly assessed
30. Fertilizer...
• In isolation from seeds, economic returns very
doubtful ‘on average’ (so scope of expansion
beyond 40% unlikely)
– Yield difference minimal, VC ratios for most crops
not high enough
– Relatively high cost would suggest even in
‘packages’ not massive returns
• Meanwhile strongly promoted despite lack of
seeds
31. Seeds...
Even for maize only 20% improved seed use, wheat
lower
– Failure of science and adaptation: not just need
for more support, but also need innovative
institutional designs
– Failure of multiplication and distribution system:
design failures
33. 3.2 Scale of production
• Are farms too small to be efficient? Would
there be gains from plot consolidation?
– No evidence (!)
• Does it mean large scale commercial farming
no role?
– Not necessarily – and scope for integrating
currently ‘separate’ developments (e.g. contract
farming, scale economies in marketing)
34. 3.3 Input markets
• Seeds, fertilizer, credit, transport have in
common ‘tinkering’, with regulatory and
access advantages for incumbents (private or
parastatals)
• Argument pro: ‘they do their job reasonably well’
• Argument against is dynamic: ‘no competitive
forces to encourage efficiency improvements or new
entry’
• Key trick: develop contestability of these markets
35. 3.4 Input Credit
• Input credit system (with regional state
budget at collateral) dismantled
• Input credit remains highly risky for both
farmer and financial institution, risking default
• Need for sustainable design of input credit
system, including with systems of insurance
36. Conclusions
• Danger of considering agricultural growth in
isolation
• Growth in agriculture constrained by
– lack of urban income growth and
– by failures in science and seed markets,
– limited returns to fertilizer,
– and likely dynamic constraints from input market
structures.
37. 3 final questions
• What about non-food/export crops?
– tradable, exportable
– Its growth can perform same role as ‘urban
income growth’, unless land competition with
food when it would affect urban growth
• Why not off-farm income?
• Where will urban income growth come from?