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Returns to Investment in Agriculture

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Investment in agriculture is necessary for ensuring rapid economic growth and poverty reduction in Zambia, as elsewhere in Africa. Yet many of the key investments required to accelerate agricultural growth – technological research, rural infrastructure and market standards, organization and enforcement -- are public goods. Because the private sector cannot capture gains from these investments, they will not invest in amounts sufficient to ensure broad-based agricultural growth. Therefore, the public sector needs to provide the necessary research, transport and market infrastructure necessary to stimulate agricultural growth. Zambia currently allocates 6% of government outlays for agriculture. This is less that the 10% commitment Zambia has made under the CAADP agreement and far less than the 15% spent by Asian countries at the launch of their Green Revolution. In allocating these funds, Zambia spends the majority of its discretionary agricultural budget on recurrent subsidies for private farm inputs, primarily fertilizer, while spending far less on rural infrastructure and technology development. Yet international evidence suggests that returns to private input subsidies are typically lower than returns to investments in public goods, in part because private input subsidies are prone to rent-seeking and in part because public input subsidies substitute for private financing of these private inputs. Investment in public goods such as agricultural research and extension, rural roads and irrigation typically produce returns two to six times greater than spending devoted to input subsidies. Therefore, a reorientation of public spending, away from private input subsidies and towards increased investment in public goods, would likely accelerate agricultural growth in Zambia.
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POLICY SYNTHESIS
FOOD SECURITY RESEARCH PROJECT-ZAMBIA
Ministry of Agriculture & Cooperatives, Agricultural Consultative Forum, Michigan State University and Golden Valley
Agricultural Research Trust (GART) – Lusaka Zambia
Number 19 (Downloadable at http://wwwaec.msu.edu/agecon/fs2/zambia/index.htm) January 2007
RETURNS TO INVESTMENT IN AGRICULTURE
By Steven Haggblade
Key Messages:
Investment in agriculture is necessary for ensuring rapid economic growth and poverty reduction in
Zambia, as elsewhere in Africa. Yet many of the key investments required to accelerate
agricultural growth – technological research, rural infrastructure and market standards,
organization and enforcement -- are public goods. Because the private sector cannot capture gains
from these investments, they will not invest in amounts sufficient to ensure broad-based
agricultural growth. Therefore, the public sector needs to provide the necessary research, transport
and market infrastructure necessary to stimulate agricultural growth.
Zambia currently allocates 6% of government outlays for agriculture. This is less that the 10%
commitment Zambia has made under the CAADP agreement and far less than the 15% spent by
Asian countries at the launch of their Green Revolution.
In allocating these funds, Zambia spends the majority of its discretionary agricultural budget on
recurrent subsidies for private farm inputs, primarily fertilizer, while spending far less on rural
infrastructure and technology development. Yet international evidence suggests that returns to
private input subsidies are typically lower than returns to investments in public goods, in part
because private input subsidies are prone to rent-seeking and in part because public input subsidies
substitute for private financing of these private inputs. Investment in public goods such as
agricultural research and extension, rural roads and irrigation typically produce returns two to six
times greater than spending devoted to input subsidies. Therefore, a reorientation of public
spending, away from private input subsidies and towards increased investment in public goods,
would likely accelerate agricultural growth in Zambia.
1. WHY INVEST IN AGRICULTURE?
1.1. Economic growth. Economic growth,
structural transformation and wide-scale poverty
reduction all require productivity gains in
agriculture. Economic growth in Africa, where
75% of the labor force works in agriculture, will
require significant improvements in agricultural
technology to bridge the startling gap in farm
productivity between African and developing
regions of Asia and Latin America (Table 1).
Structural transformation, the process by which
rich countries have developed diversified,
affluent economies, normally requires a transfer
of resources from agriculture to other sectors of
the economy. But this transfer cannot take
place without prior productivity gains in
agriculture, which permit the release of labor
and capital without reducing farm output and
raising food prices (Timmer, 1988).
1.2. Poverty reduction. Agriculture likewise
serves as a powerful engine of poverty
reduction. In Africa, where 70% of the poor
work primarily in agriculture, acceleration of
agricultural productivity growth offers a
potentially powerful tool for spearheading
broad-based income gains among the rural poor
(Christiansen and Demery, 2006). According to
Michael Lipton, “no country has achieved mass
dollar poverty reduction without prior
investment in agriculture” (Lipton, 2005).
England’s agricultural revolution of the mid-
1700’s set the stage for its subsequent industrial
revolution (Timmer, 1974). In India’s Green
Revolution of the 1960’s and 1970s, new
technology launched rapid agricultural growth
and significant poverty reduction from the
1970’s onwards (Hazell, Fan and Thorat, 1999).
In China, strong commitment to agricultural
research and complementary rural investments
triggered significant agricultural productivity
gains, setting the stage for large-scale rural
poverty reduction from the 1980’s onwards
(Fan, Zhang and Zhang, 2003) (Figure 1). In
Africa, recent evidence from Uganda suggests
that sustained agricultural productivity gains
have likewise triggered rapid poverty reduction
there (Fan et al, 2005). Even Africa’s urban
poor, who spend the majority of their income on
food, see their real incomes rise when growing
agricultural productivity and output enable
reduction in staple food prices. Only growing
agricultural productivity can simultaneously
reduce food prices, which govern real incomes
and poverty in urban areas, and increase
incomes of the majority of Africa’s poor, who
work in agriculture.
Table 1. Differences in Agricultural Productivity and Welfare Across Developing Regions
Africa,
Sub-Saharan South Asia* East Asia Latin America
Cereal yields, 2005 (tons/ha) 0.9 2.8 3.0
Value of agricultural production per farm population $198 $393 $1,856
Undernourishment, 2004 (% of population) 32 21 12 10
Malnutrition, 2004 (% children under 5, weight for age) 29 45 15 7
Poverty headcount, 2001 (% under $1 per day) 44 31 12 9
Per capita income, 2004 ($US) $607 $598 $1,417 $3,584
* Agricultural data refer to developing Asia
Source: World Development Indicators, 2006.
Figure 1. Trends in Agricultural Production and Poverty in China
0
50
100
150
200
250
300
350
400
450
1980
1985
1990
1995
Agricultural production index
0
5
10
15
20
25
30
Percent in poverty
1.3. Sustainability of agricultural growth. In
domesticated agricultural systems, humans
assume responsibility for the survival of plant
species. Yet plant breeders note that
domestication by humans has generally
involved deselecting for traits critical to species
survival in nature (Evans, 2000; Harlan, 1997).
While plants stagger germination of their seeds
2
to ensure survival in the face of uncertain
weather, humans breed for uniform germination.
While plants devote large energy to
development of roots and other organs
necessary to ensure plant survival across
seasons, humans select for disproportionate
biomass concentration in the edible reproductive
organs. While natural selection among wild
plants favors maximum seed dispersal, to
enhance prospects for reproductive success,
humans select for non-shattering varieties to
reduce labor costs and increase harvested yields.
Because human farmers and researchers have
deliberately bred key natural survival traits out
of the plants and animals they domesticated,
these species typically cannot survive in the
wild. As a result, the survival of domesticated
agriculture depends fundamentally on well-
functioning human agricultural research
institutions, both on-farm and off.
Given rapid mutation of pests and diseases,
domesticated animals and plants rapidly
succumb to these predations unless human
research systems can develop resistant varieties
or chemical and biological controls. In the US
agricultural research system, over 50% of all
wheat research is devoted to maintenance
breeding, simply to maintain yields in the face
of ever-evolving strains of wheat rust. In
Uganda, cassava production fell 75% in five
years following the outbreak of a new strain of
cassava mosaic virus in 1989 (Otim-Nape,
2005). Zambian cassava production fell over
30% during the early 1980’s following invasion
of the cassava mealybug (Chitundu, 1992). In
both cases, rapid response by research systems
responded successfully, in Uganda through
introduction of resistant varieties and in Zambia
and elsewhere through internationally supported
biological pest control. For domesticated
agricultural systems, investments in agricultural
research are not only necessary for the growth
of agricultural systems, but for their very
survival.
1.4. Public goods. Many of the investments
necessary to sustain agricultural productivity
growth are what economists refer to as “public
goods”. The private sector will not supply them
because they cannot recoup their investments.
Private seed companies will produce hybrid
seeds for sale because farmers must return to
them each season to purchase more seed. But
with closed-pollinating crops, such as rice, or
cross-pollinating varieties of maize or
vegetatively propagated crops, such as sweet
potatoes and cassava, farmers can retain
planting stock from prior seasons. Because
private companies cannot make money selling
seeds year after year, they inevitably
underinvest in research for these important
crops. Roads provide another example. Private
firms will not invest in road construction or
maintenance, except on their own plantations,
because they cannot exclude people from public
roadways to defray their investment costs.
Where externalities arise, as with plant and
animal diseases, private farms and firms will
typically underinvest in preventative measures.
This creates a strong case for public investment
in combating these types of agricultural pests
and diseases. As a result, broad-based
agricultural growth cannot take place without
ongoing government commitment to supply the
technology, infrastructure, markets and disease
control systems that are essential for sustaining
agricultural growth.
2. NEPAD–THE MAPUTO COMMITMENT
African leaders, through the New Partnership
for Africa’s Development (NEPAD) initiative,
have increasingly underlined the importance of
accelerating agricultural growth in Africa. They
believe that enhanced agricultural performance
will constitute a necessary centerpiece of broad-
based poverty reduction efforts across the
continent (CAADP, 2005). For this reason,
NEPAD’s Comprehensive African Agricultural
Development Programme (CAADP) calls for a
6% growth rate in agriculture.
Recognizing the critical need for public
investments to enable this agricultural growth,
African Heads of State and Government, have
agreed to increase their budgetary allocations
for agriculture to 10% of total outlays by 2008.
This represents a substantial increase from the
current average of 6% (CAADP, 2005; Fan and
Rao, 2004).
Zambia, like other governments, has pledged to
increase spending on agriculture to 10% of
budget outlays. But since 2003, Zambia has not
attained this level of agricultural spending.
During the past three calendar years, allocations
3
for agriculture have ranged between 5 and 6%
of total spending (Govereh et al., 2006).
The quality of agricultural spending matters as
much as the quantity. Clearly, spending in
some areas and activities will prove more
productive than in others. Currently, Zambia
spends over 60% of its discretionary agricultural
budget on recurrent subsidies, with half going to
subsidize fertilizer for selected individual
farmers and a further 12% for maize price
supports through the Food Reserve Agency
(Table 2). Roughly 5% of discretionary
spending goes for investments in roads and
irrigation, while the remaining on-third finances
recurrent costs necessary for operating the
ministry administrative functions as well as its
agricultural research and extension programs.
Without more specific details, it is difficult to
say how much of these recurrent expenditures
are invested in supplies and materials required
to finance Zambia’s agricultural research
system. What is clear, however, is that the
single largest line item in the agricultural budget
goes for fertilizer subsidies to individual
farmers.
As an aid in ongoing budget deliberations, this
brief summarizes available evidence on the
returns to various forms of agricultural
spending. Because comparatively few detailed
benefit/cost studies have been conducted in
Zambia, this brief relies primarily on available
evidence from around the developing world.
3. RECURRENT SUBSIDIES FOR
PRIVATE INPUTS
In general, recurrent subsidies for private inputs
generate low returns. Studies from Latin
America reveal negative returns in many cases,
due to high levels of corruption, crowding out of
private input purchases, resource misallocation
and consequent inefficiencies in input use.
Estimates from 15 Latin American studies
indicate that a 1% increase in budget share for
agricultural input subsidies reduces per capita
agricultural income by 0.3% to 0.5% (Lopez,
2005).
In some instances, however, input subsidies to
individual farmers produce positive returns.
This was particularly true in the early decades
of the Green Revolution in Asia, where
subsidies were used to enable small farmers to
adopt new irrigated technology packages (Table
3). In general, input subsidies work best where
new technology becomes available, farmers
control water and have good extension support.
None of these conditions currently holds in
Zambia. Even in Green Revolution Asia, where
these conditions did prevail, returns to input
subsidies have typically trended downwards
over time (Table 3).
Table 2. Zambian Government Budget Allocation for Agriculture, 2006
Spending category
b
illion Kw
a
percent billion K percent
Subsidies
Fertilizer 214 33% 214 51%
Output prices 50 8% 50 12%
Operating expenditure
personnel 84 13% 84 20%
operating costs 51 8% 51 12%
Donor supported development and poverty reduction 227 35%
Public investments
capital spending 1 0% 1 0%
irrigation 18 3% 18 4%
Total 645 100% 418 100%
Source: Govereh, Malamo and Shawa (2006).
Total spending Discretionary Spending
4
Table 3. Returns* to Private Input Subsidies and Long-Term Investments in Public Goods
1960's 1990's
Recurrent subsidies on private farm inputs
Farm credit 3.9 0.0
Fertilizer 2.4 0.5
Irrigation costs 2.2 0.0
Power 1.2 0.6
Long-term Invesment in public goods
Roads 8.8 3.2
Education 6.0 1.5
Agricultural research 3.1 6.9
* Increase in agricultural GDP (rupees) per rupee of spending
Source: Fan, Thorat and Rao (2004).
India
Even where they are positive, returns to private
input subsidies are typically lower than returns
to investments in public goods. During the
1960’s, public investments produced returns
roughly double those of private input subsidies,
while during the 1990’s public investments
produced returns six times as great (Table 3).
This difference arises, in part, because input
subsidies for private goods encourage rent-
seeking as farmers lobby to receive the income
transfer these subsidies represent. Moreover,
government subsidies tend to undercut private
input sales. In Zambia, FSP fertilizer subsidies
reduce private fertilizer sales by roughly 75% in
accessible areas that are well-served by private
sector fertilizer distributors (Govereh and Jayne,
2007).
In addition, because fertilizer and other farm
inputs are private goods, subsidies to individual
farmers displace funds that these farmers would
otherwise spend purchasing inputs. Evidence
from Zambia’s FSP indicates that fertilizer
subsidy recipients are typically the better off
farmers (Table 4). Their counterparts, who
receive no input subsidy, purchase fertilizer and
produce for the market at roughly comparable
rates to the subsidized farmers.
Table 4. Characteristics of Households Receiving Fertilizer Subsidies in Zambia, 2002/3
Fertilizer source Income Assets Land net sellers net buyers
ha/capita
No fertilizer used 266 173 0.15 20% 48%
Private sector purchase 774 342 0.2 46% 32%
Subsidized public supply (FSP) 804 425 0.23 51% 22%
Source: Govereh, Jayne, Black et al. (2006).
000K/capita
Household welfare Maize marketing
5
So the incremental output gain produced by
these targeted subsidies appears to be quite
small. For this reason, returns to fertilizer
subsidies in Zambia appear to be quite low
(Precise estimates of returns to FSP subsidies
are currently under way and will be published in
the near future by FSRP and MACO).
4. INVESTMENTS IN PUBLIC GOODS
Agricultural research and extension typically
generate the highest returns of any form of
agricultural spending. A recent summary of
over 600 rate of return studies suggests that
returns to agricultural research average 50% in
Africa, 78% in Asia and 54% in Latin America
(Allston et al, 2005). Variability of outcomes is,
however, highest in Africa, and, in specific
instances, returns may even prove negative.
The diversity of Africa’s farming systems and
frequent reliance on rainfed crop production
contribute to this high variability. Median
returns, however, remain consistently higher
than any other form of public investment. In
Zambia, for example, investments in root and
tuber crop research during the 1980’s and
1990’s has led to several rounds of new varietal
releases of cassava and sweet potatoes,
triggering a productivity surge in both of these
food staples (Govereh et al. 2006).
Public investment in roads and irrigation,
likewise, generates generally strong returns
(Table 5). As a general rule, investments in
secondary roads prove more productive in
stimulating agricultural growth than do
investments in paved roads (Fan et al, 2004).
Investment in irrigation infrastructure, likewise,
proves profitable in many circumstances,
although returns vary considerably by location
(Table 6) and over time (Table 3)
Table 5. Returns* to Investment in Agricultural Public Goods
Spending category China India Thailand Uganda Viet Nam
Research 9.6 13.5 12.6 12.4 12.2
Irrigation 1.9 1.4 0.7 0.4
Roads 2.1 5.3 0.9 3
feeder 1.5 7.2
paved n.s. n.s.
Electricity 0.5 0.3 4.9 n.s.
Telephones 1.9 n.s.
Education 3.7 1.4 2.1 2.7 2.1
Health 0.9 0.9
* Returns = $ increase in agricultural output per $ of incremental spending.
n.s. = not statistically significant
Sources: Fan, Zhang and Zhang (2002); Fan, Hazell and Thorat (2000), Fan, Zhang
a
Agricultural growth requires continual
improvements in farm technology, well
functioning markets and infrastructure adequate
to move goods at reasonable cost from farm to
market. In all three areas, public goods are
essential. Technology development in closed
pollinating and vegetatively propagated crops
requires publicly funded research and extension
services. Well-functioning markets require
property rights, grades and standards and
enforceable contracts, which are typically public
goods. Infrastructure, such as farm-to-market
roads, power lines and ports are, likewise,
normally public goods. So, in general, public
good remain critical to ensuring agricultural
productivity and income growth.
5. IMPLICATIONS
Quantitatively, Zambia spends about 6% of its
budget on agriculture, significantly less that the
10% CAADP target to which Zambia
committed in 2003. Nor does current spending
come close to the 15% Asian countries devoted
to agriculture during the Green Revolution years
(Fan and Rao, 2003).
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Table 6. Regional Variation in Returns to Public Investment in Agriculture
R&D Roads* Education Irrigation Telecoms
Uganda
East 10.8 8.7 3.5 - -
North 11.8 4.9 2.1 - -
Central 12.5 6.0 2.1 - -
West 14.7 9.2 3.8 - -
all Uganda 12.3 7.2 2.7 - -
China
Coastal 8.6 8.4 9.8 2.4 7.1
Central 10.0 3.8 3.7 1.8 2.6
Western 12.7 4.3 5.1 1.6 4.1
all China 9.6 8.8 8.7 1.9 7.0
* In Uganda, refers to feeder roads.
- not evaluated for Uganda
Sources: Fan, Zhang and Rao (2004) and Fan et al. (2003).
Qualitatively, Zambia spends the majority of its
discretionary resources on recurrent subsidies
for private inputs. Though politically popular,
these subsidies are typically less effective at
stimulating agricultural growth than investments
in research, extension, roads and other public
goods, because the input subsidies displace
private spending that would otherwise occur.
They are also prone to diversion and
manipulation.
Recurrent spending on input subsidies for
private goods competes directly with long-term
investment allocations for public goods such as
roads, rural education, and agricultural research.
Given the extremely low level of public
investment in agricultural research in Zambia,
the cost of this neglect is likely to be high. The
gradual decay of Zambia’s public agricultural
research system leaves Zambian farmers
increasingly vulnerable to the emergence of new
pests and viruses. Without a steady stream of
new genetic material, productivity of crops and
livestock will fall over time. Available
evidence suggests that investment in public
goods such as agricultural research, extension
and roads constitutes one of the most effective
tools available for stimulating economic growth
and poverty reduction. Therefore, a
reorientation of spending, away from private
input subsidies and towards increased
investment in public goods, would l
________________________________
ikely
ccelerate agricultural growth in Zambia.
Alston, Julian M.; M Pardey, Philip G.;
a
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df
__________________________________________
The Food Security Research Project is a collaboration between the Agricultural Consultative Forum, the Ministry of
Agriculture and Cooperatives, and Michigan State University, and is funded by the United States Agency for International
Development in Lusaka.
The Zambia FSRP field team comprises J. Govereh, M. Hichambwa, M. Nyembe and S. Kabwe. MSU-based researchers
in the FSRP are C. Donovan, T.S. Jayne, D. Tschirley, S. Haggblade, M. Weber, A. Chapoto and N. Mason. Please direct
all inquiries to the In-country Coordinator, Food Security Research Project, 86 Provident Street, Fairview, Lusaka; tel: 260
1 234539; fax: 260 1 234559; e-mail; goverehj@msu.edu
... Inadequate capital, farm credit, inputs, and labor shortages during sowing season are the main constraint to staple-led growth, which must be addressed through higher state expenditure on agriculture and extension services. Sustained public investments in agriculture, through agricultural sector liberalization and diversification, and private investments in farm capital, through microcredit, remain critical to longer term staple-led growth (Haggblade, 2007;Jayne et al., 2006a). ...
... Thus missing and deteriorating infrastructure in rural and particularly remote areas remains a key constraint to more pro-poor agricultural growth, as it undermines access to urban and regional markets. Beyond addressing issues with existing infrastructure, the road network must be extended to remote rural areas (Haggblade, 2007;Jayne et al., 2006a). Urban bias and the paved roads connecting just urban areas have left rural infrastructure gaps, resulting in the isolation of many rural areas and have reinforced their dependence on subsistence crop production and denied opportunities for engaging in market oriented agriculture. ...
Chapter
Sub-Saharan Africa is burdened with poverty and food security. Eradication of extreme poverty and hunger is a key Millennium Development Goal. Many African governments have pursued economic reforms and agricultural policy interventions in a quest to accelerate economic growth that contributes to poverty reduction. Taking Zambia as a case example the agricultural policy interventions are examined for the period 1964-2008, to better understand their likely impacts on food security and poverty. The analysis shows that past interventions created perverse incentives for farmers and had mixed effects on enhancing the production of stable foods such as maize. The potential of agriculture to generate a more pro-poor growth process depends on the creation of new market opportunities that benefit the poor the most. The state should encourage private sector activity and investments for addressing infrastructure constraints to improve market access and accelerate more pro-poor growth through renewed investments in agricultural research and extension.
... Our assumption in the analyses presented is that that some countries will continue to have substantially less purchasing power than others over the next few decades. Although global trade is important, we assume that regions with small agriculturally based economies today are unlikely to transform themselves into industrial nations without first improving their agricultural productivity (Kates 2000;Fafchamps 2004;Haggblade 2007). The collision between increasing global food demand, competition for food with developed world energy consumers and increasingly difficult production conditions means that the food security situation is likely to worsen. ...
... The context in which production occurs is just as important as production itself. Economic growth, improved food security, and widescale poverty reduction all require productivity gains in agriculture (Haggblade 2007). Agriculture serves as a powerful engine of poverty reduction, one which can bring the poorest a rapid improvement in income through direct technology transfer. ...
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Despite accelerating globalization, most people still eat food that is grown locally. Developing countries with weak purchasing power tend to import as little food as possible from global markets, suffering consumption deficits during times of high prices or production declines. Local agricultural production, therefore, is critical to both food security and economic development among the rural poor. The level of local agricultural production, in turn, will be determined by the amount and quality of arable land, the amount and quality of agricultural inputs (fertilizer, seeds, pesticides, etc.), as well as farm-related technology, practices and policies. This paper discusses several emerging threats to global and regional food security, including declining yield gains that are failing to keep up with population increases, and warming in the tropical Indian Ocean and its impact on rainfall. If yields continue to grow more slowly than per capita harvested area, parts of Africa, Asia and Central and Southern America will experience substantial declines in per capita cereal production. Global per capita cereal production will potentially decline by 14% between 2008 and 2030. Climate change is likely to further affect food production, particularly in regions that have very low yields due to lack of technology. Drought, caused by anthropogenic warming in the Indian and Pacific Oceans, may also reduce 21st century food availability in some countries by disrupting moisture transports and bringing down dry air over crop growing areas. The impacts of these circulation changes over Asia remain uncertain. For Africa, however, Indian Ocean warming appears to have already reduced rainfall during the main growing season along the eastern edge of tropical Africa, from southern Somalia to northern parts of the Republic of South Africa. Through a combination of quantitative modeling of food balances and an examination of climate change, this study presents an analysis of emerging threats to global food security. KeywordsGlobal food security-Food availability-Agricultural production-Agricultural development-Climate change-Drought-Population growth
... Our assumption in the analyses presented is that that some countries will continue to have substantially less purchasing power than others over the next few decades. Although global trade is important, we assume that regions with small agriculturally based econ- omies today are unlikely to transform themselves into industrial nations without first improving their agricultural productivity (Kates 2000;Fafchamps 2004;Haggblade 2007). The collision between increasing global food demand, competition for food with developed world energy consumers and increasingly difficult production conditions means that the food security situation is likely to worsen. ...
... Economic growth, improved food security, and wide- scale poverty reduction all require productivity gains in agriculture (Haggblade 2007). Agriculture serves as a powerful engine of poverty reduction, one which can bring the poorest a rapid improvement in income through direct technology transfer. ...
... Insufficient public investment in agricultural research, extension, organization of markets and basic infrastructure interact to consistently constrain smallholder productivity. Given that the private sector cannot capture gains from public investments government has the responsibility to provide these goods to stimulate productivity growth (Haggblade, 2007). Thurlow et al (2007) found out that if Zambia can achieve large increases in crop yields, it is possible to achieve CAADP target of 6% annual growth. ...
... itive trend and recorded a phenomenal growth of 16% per year over the last nine years,Table 7. No other function has absorbed that amount of resources. In addition, no other function has increased its spending faster than support for subsistence production. In terms of size of spending, this is clearly the priority function for Zambia's government. Haggblade (2007) argues that provision of private farm requisites by government generates very low returns because of rent-seeking and crowding out of private investment. Prioritizing spending on low-return programs reduces the overall impact of total PAE on GDP. It is possible for Zambia to continue increasing resources to this function but fail to reg ...
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This paper assesses the level and composition of the Zambia’s public expenditures in the agricultural sector from 2000 to 2008. By measuring the size of public agricultural expenditures, the study will answer whether the Government of Zambia met CAADP’s target of allocating 10% of national budget to agriculture in 2008. Furthermore, examining what the fund is being spent on will shed light on the extent to which spending contributes to agricultural growth. This review will also characterize the spatial patterns of expenditures across provincial boundaries. The results of this work will hopefully lay a foundation for future analysis of the impacts of public agricultural spending on sector performance.
... Con respecto al sector agrario, (Haggblade, 2007), en un artículo retorno de la inversión en la agricultura, manifiesta que, -la inversión en la agricultura es una condición fundamental para el crecimiento económico, y la reducción de la pobreza. Para ello se debe incrementar significativamente los niveles de productividad en la agricultura‖. ...
... Block (1994) reported that research expenditures contributed to one-third of the growth in agricultural Total Factor Productivity (TFP) in Sub-Saharan Africa. A study conducted by Haggblade (2007) in Zambia has revealed that politically popular programs such as subsidies for agricultural inputs like seeds and fertilizers are less effective to create a substantial return than the investment in agriculture research. The growth in public spending in agricultural research and development has slowed down world-wide ( Pardey et al., 2016). ...
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Agricultural research plays a significant role in increment in productivity and contributes to food security. Very few studies on the impact of public research spending on different sectors and commodities in Nepal has been documented. This study was designed to estimate the adoption lags of improved potato varieties and benefits generated by potato improvement research in Nepal. More specifically, the study answers two basic questions: (i) whether investment in potato research is justifiable? and (ii) how long is it taking to replace old improved varieties? We took public annual potato research investments of Nepal from the Fiscal year 2001 to 2017 from Nepal Agricultural Research Council (NARC). The household survey was carried out to estimate the potato varieties coverage in Nepal in 2017. Other secondary data were sourced from the Ministry of Finance, Ministry of Agricultural and Livestock Development, FAO stat, Nepal Rastra Bank and NARC to complement the analysis. We have used a simple economic framework to estimate the benefits generated from agricultural research. The estimated benefit and cost streams were used to calculate Benefit-Cost Ratio (BCR) and Net Present Value (NPV). Results showed that the majority of the potato researchers had done research related to crop husbandry (seed production and crop managements); while the limited number of researchers had specialized in breeding activities. The annual growth rate of potato productivity was 214.49 kg per annum per ha which had increased at the rate of 1.76 percent per annum compound growth rate. The results revealed that the average weighted age of improved potato varieties was 21.83 years and each NPR. investment on potato research has given 508 NPR. and NPR. 13760 million NPV at a 12 percent discount factor during the last 17 years. Similarly, the contribution of potato research to GDP and AGDP was found 0.323% and 0.989% respectively. Therefore, future investment and focus should be concentrated on potato research and scaling up activities, and reducing variety adoption lag to obtain additional benefits from potato research investment.
... Non-rivalrous means that consumption of the good by one individual does not reduce availability of the good for consumption by others while non-excludability that no one can be effectively excluded from using the good. Economists use this term to classify investments necessary to sustain agricultural productivity (Haggblade, 2007). These are goods that the private sector will not supply because they cannot recoup their investments. ...
... Government involvement is thus subject to rent-seeking while also substituting for or crowding out private spending. Investments in public goods can result in returns up to six times higher than are currently being realised by the government (Haggblade, 2007). ...
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This article assesses major features of the Zambian agricultural market that have led to the underdevelopment of the staple food marketing system, reviews existing empirical evidence explaining the variable performance of the maize sub-sector, and suggests potential corrective measures. As smallholder farmers in agricultural markets are considered to be vitally important to the attainment of food security, special attention is placed on how the current system affects these farmers, and on how to foster improved participation. The role and potential of new generation cooperatives is also considered.We identify seven major areas in need of serious and coordinated attention if the state of the agricultural sector and marketing functions is to improve.
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Bu doğrultuda çalışmanın amacı, Türkiye’de 2008-2017 yılları arası dönemde tarım sektörüne yapılan kamu yatırım harcamalarının, sektörel GSYH üzerinde etkisi olup olmadığını ekonometrik analiz yöntemi ile tespit etmektir. Bu amacı gerçekleştirmek için çalışmada panel veri analiz yöntemi kullanılacaktır. Çalışmada öncelikle tarım sektörünün ekonomik ve sosyal etkileri üzerinde durulacaktır. Daha sonra Türkiye’de tarım sektörünün yapısı incelenecektir. Sonrasında tarımsal harcamalar ve GSYH arasındaki ilişki hakkında yapılan çalışmalar, ilgili literatür kısmında açıklanacaktır. Çalışmanın analiz kısmını oluşturan sonraki bölümde araştırmada kullanılacak olan model ve veri seti açıklanacak ve tespit edilen ampirik bulgular incelenecektir. Son olarak sonuç bölümünde elde edilen bulgular yorumlanacak ve Türkiye’de daha verimli tarımsal harcamalar elde edilmesi için çıkarımlar yapılacaktır.
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Analyzes the role of government in agricultural transformation in terms of investments and the problems of success. A recurrent theme is that a successful structural transformation is painful for the agricultural sector in all societies - the rapidly growing economies of East and Southeast Asia are facing the fiscal burden of heavy agricultural subsidies before their overall economies can bear it. Asks whether the lessons from Asia in stimulating agricultural transformation can be transferred to the very different African situation. -after Author
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A total of 289 studies of returns to agricultural R&D were compiled and these provide 1821 estimates of rates of return. After removing statistical outliers and incomplete observations, across the remaining 1128 observations the estimated annual rates of return averaged 65 per cent overall — 80 per cent for research only, 80 per cent for extension only, and 47 per cent for research and extension combined. These averages reveal little meaningful information from a large body of literature, which provides rate‐of‐return estimates that are often not directly comparable. This study was aimed at trying to account for the differences. Several features of the methods used by research evaluators matter, in particular assumptions about lag lengths and the nature of the research‐induced supply shift.
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The paper discusses the economic effects of misallocation of public expenditures in favor of private goods rather than public goods. It first lays out certain key hypotheses regarding the consequences of the apparent public sector allocation inefficiency and the factors that explain this phenomenon. It then discusses existing empirical evidence that lends at least indirect support to these hypotheses. Finally, it presents new empirical evidence for the rural sector in Latin America which documents the extent of the misallocation of public expenditures, its consequences for agricultural growth and rural poverty, and the role of certain key politico-institutional factors in explaining the misallocation.
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Agricultural research and extension programs have been built in most of the world's economies. A substantial number of economic impact studies evaluating the contributions of research and extension programs to increased farm productivity and farm incomes and to consumer welfare have been undertaken in recent years. This chapter reviews these studies using estimated rates of return on investment to index economic impacts. In almost all categories of studies, median (social) estimated rates of return are high, (often exceeding 40 percent) but the range of estimates was also high. The chapter concludes that most of the estimates were consistent with actual economic growth experiences.
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For much of the post-WWII period, governments in rich and poor countries alike have increased public spending on, and performance of, agricultural research. The public involvement in, and policies toward, agricultural research and development (R&D) have undergone a sea of change in more recent years. In this article we document these changes, focusing on the public and, rapidly evolving, private roles in financing agricultural R&D, and the international dimensions of these funding and policy issues. We restate the principles for government intervention in research, and highlight the financing aspects of these interventions, before concluding the paper with some reflections on the implications of all these changes for internationally conceived and funded public agricultural R&D.
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Over the past three decades Africa's public agricultural research systems have changed in substantive ways. The total number of researchers increased fourfold, the dependency on expatriate researchers significantly declined, while the education levels of national researchers improved. Initially the growth in research staff was matched by growth in expenditures. But since the late 1970s, real research spending has stagnated. In addition, loans and grants from donor agencies now account for a sizeable share of total funding for many African agricultural research systems. Many of the developments of the past decade in personnel, expenditures, and sources of support for public sector research and development (R & D) in Africa are not sustainable. Spending per scientist has declined continuously during the past 30 years, most dramatically during the 1980s. Resources are spread increasingly thin over a growing group of researchers, which has negative effects on the efficiency and effectiveness of agricultural research in Africa.
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