CHAPTER 9: AGRICULTURAL TRANSFORMATION AND RURAL DEVELOPMENT

I.The Imperative of Agricultural Progress and Rural Development

 The heavy emphasis in the past on rapid industrialization may have been misplaced
 Agricultural development is now seen as an important part of any development strategy
 Three complementary elements of an agriculture and employment-based strategy
1. Accelerated output growth
2. Rising domestic demand for agricultural output
3. Non-agricultural rural labor intensive rural development activities that are supported by the farming
community

Integrated rural development- The broad spectrum of rural development activities, including small-farmer agricultural
progress, the provision of physical and social infrastructure, the development of rural nonfarm industries and the
capacity of the rural sector to sustain and accelerate the pace of these improvements over time.

II. Agricultural Growth: Past Progress and Current Challenges

 Trends in Agricultural Productivity

The ability of agricultural production to keep pace with world population growth has been impressive,
defying some neo-Malthusian predictions that global food shortages would have emerged now and it has
actually been output gains in the developing world that have led the way. According to World Bank, developing
world experienced faster growth in the value of agricultural output than the developed world.

Green Revolution – The boost in grain production associated with the scientific discovery of new hybrid seed
varieties of wheat, rice, and corn that have resulted in high farm yields in many developing countries.

 Market Failures and the need for Government Policy

A major reason for the relatively poor performance of agriculture in low income regions has been the
neglect of this sector in the development priorities of their governments, which the initiatives just described are
intended to overcome. This neglect of agriculture and the accompanying bias toward investment in the urban
industrial economy can in turn be traced historically to the misplaced emphasis on rapid industrialization via
import substitution and exchange rate overvaluation (see Chapter 12) that permeated development thinking
and strategy during the post war decades.

Roles of Government in Agricultural Development

• Environmental externalities
• Agricultural research and extension services
• Economies of scale in marketing
• Informational asymmetries in product quality
• Providing institutions and infrastructure
• Ensure shared growth in agriculture sector
• Addressing poverty traps

III. The Structure of Agrarian Systems in the Developing World

 Three Systems of Agriculture

1. Agriculture-based countries often subsistence, but agriculture makes up large part of growth
2. Transforming countries, most of world’s rural people, large % of poverty incidence found there, low
contribution of agriculture to growth
3. Urbanized countries, half or more even of the poor found in urban areas

 Agrarian patterns in Latin America: Progress and Remaining Poverty Challenges

In Latin America, as in Asia and Africa, agrarian structures are not only part of the production system but
also a basic feature of the entire economic, social, and political organization of rural life.

1. Latifundio- A very large landholding found particularly in the Latin American agrarian system, capable of
providing employment for more than 12 people, owned by a small number of landlords, and comprising a
disproportionate share of total agricultural land .
2. Minifundio- A landholding found particularly in the Latin American agrarian system considered too small to
provide adequate employment
for a single family.
3. Family Farm- A farm plot owned and operated by a single household.
4. Medium-size farm- A farm employing up to 12 workers.

Transaction Costs- costs of doing business related to gathering information, monitoring, establishing reliable
suppliers, formulating contracts, obtaining credit and so on.

 Transforming Economies: Problems of Fragmentation and subdivision of Peasant land in Asia

 Throughout much of the twentieth century, rural conditions in Asia typically deteriorated. Nobel
laureate Gunnar Myrdal identified three major interrelated forces that molded the traditional pattern of land
ownership into its present fragmented condition:
(1) the intervention of European rule,
(2) the progressive introduction of monetized transactions and the rise in power of the moneylender
(3) the rapid growth of Asian populations

Colonial rule acted as an important catalyst to change, both directly through its effects on property
rights and indirectly through its effects on the pace of monetization of the indigenous economy and on the
growth of population. Contemporary landlords in India and Pakistan are able to avoid much of the taxation on
income derived from their ownership of land. Often absentee owners who live in the town and turn over the
working of the land to sharecroppers and other tenant farmers. The creation of individual titles to land made
possible the rise to power of another dubious agent of change in Asian rural socioeconomic structures, the
moneylender.

1. Landlord- the proprietor of a freehold interest in land with right to lease out to tenants in return for
some form of compensation for the use of the land
2. Sharecropper- a tenant farmer whose crop has to be shared with the landlord, as the basis for the
rental contract
3. Tenant Farmer- one who farms on land held by a landlord and therefore lacks ownership rights and
has to pay for the use of the land, for example, by giving a share of output to the owner
4. Moneylender- a person who lends money at high rates of interest

 Subsistence Agriculture and Extensive Cultivation in Africa

Subsistence Farming- farming in which crop production, stock rearing, and other activities are conducted mainly
for personal consumption.

African agriculture systems are dominated by three major characteristics:

(1) the importance of subsistence farming in the village community
(2) the existence of some (though rapidly diminishing) land in excess of immediate requirements
(3) the rights of each family (both nuclear and extended) in a village to have access to land and water

Three historical forces restricting the growth of output:

(1) In spite of the existence of some unused and potentially cultivable land, only small areas can be planted and
weeded by the farm family when it uses only traditional tools
(2) Shifting cultivation is the most economic method of using limited supplies of labor on extensive tracts of
land.
- Tilling land until it has been exhausted of fertility and then moving to a new parcel of land, leaving the
former one to regain fertility until it can be cultivated again
(3) Labor is scarce during the busiest part of the growing season, planting and weeding times.

THE IMPORTANT ROLE OF WOMEN

The three factors that contributed to bring and incorporate women in development issue on the international agenda:

1. It was believed that because of their central role in productive and reproductive tasks, women in the third world
could play a crucial role in the population control programs.
2. Women’s crucial roles in subsistence farming and social reproductive tasks were thought to be important channel
for the provision of basic needs for the family.
3. Following Easter Boserup studies, concern about the third world women grew and the need to study the lives of
poor women as a way of getting to the bottom of poverty become clear.

Women’s Role in Economic Development

 In the developing world, particularly in Africa and Asia, women played a crucial role in agricultural production.
 In Africa, nearly all tasks associated with subsistence food production are performed by women.
 It is estimated that in addition to work in the household, women provide 60% to 80% of agricultural labour in
Africa and Asia and about 40% in Latin America. However, is statistically “invisible” in that women often receive
no payment for the work they perform.
 Women’s productive work is often carried out alongside with their domestic and child responsibilities and tends
to be less visible and valued than men’s productive work. It also includes processing and preparing food, clearing
the house, fetching water from far places, gathering and collecting fuel wood and animal dung, caring of sick
family members and olds.
 Men perform the initial task of cutting trees and bushes on a potentially cultivable plot of land, women are
responsible for all subsequent operations, including removing and burning felled trees, sowing or planting the
plot, weeding, harvesting and preparing the crop for shortage or immediate consumption.
 Women tend to work longer hours than their male counterparts.
 Women play a vital role in the economic development of one’s country. They provide an important source of
labour for cash crop production, cultivate food for household consumption and generate additional income
through cottage industries.
 Cash Crops. Crops produced entirely for the market.
 According to Ester Boserup, women in Africa did most of the agricultural work. They were found to do around
70% and in one case nearly 80% of the total which the tasks are performed with primitive tools and require
many days of long hard labour simply to produced enough output to meet the family’s subsistence
requirements.
 The production and profits from commercial crops are generally controlled by men, women are usually
responsible for the strenuous jobs of weeding and transplanting.
 Women frequently cultivate small vegetable gardens that provide food for family consumption.
 The most important role of women is providing food security for the household.
1. Through the supplementation of household earnings.
2. Diversification of household income sources.
3. Raising of livestock to augment household assets.

 Government extension programs that provide resources exclusively to men tend to exacerbate existing disparities
between men and women access to resources.
 If credit is provided solely or preferentially to men for the purpose of cash cropping, commercial production will
increase at the expense of women’s vegetable gardens.
 Many government-sponsored programs effectively continue to exclude women, often because women lack
collateral for loans or are barred from owning property or conducting financial transactions without their husband’s
permission.

The Microeconomics of Farmer Behavior and Agricultural Development

The Transition from Traditional Subsistence to Specialized Commercial Farming

Three broad stages in the evolution of agricultural production:

 The first stage is the pure, low-productivity, mostly subsistence-level traditional (peasant) farm, still prevalent in
Africa.
 The second stage is what might be called diversified or mixed family agriculture, where a small part, of the produce
is grown for consumption and a significant part for sale to the commercial sector, as in much of Asia.
 The third stage represents the modern farm, exclusively engaged in high-productivity, specialized agriculture geared
to the commercial market, as in developed countries, and often found in the highly urbanized developing countries.

Subsistence Farming: Risk Aversion, Uncertainty, and Survival

 On the classic traditional (peasant) subsistence farm, most output is produced for family consumption (although
some may be sold or traded in local markets), and a few staple foods (usually including cassava, wheat, barley,
sorghum, rice, potatoes, or corn) are the chief sources of nutrition.
Staple food. A main food consumed by a large portion of a country’s population
 The traditional farmer (peasant) usually cultivates only as much land as his family can manage without the need
for hired labour.
 Risk-averse subsistence farmers often (not irrationally) can prefer technologies that combine low mean per hectare
with low variance to alternative high yielding but higher risk technologies.
 Efforts to minimize risk and remove commercial and institutional obstacles to farmer innovation are necessary.

The Economics of Sharecropping and Interlocking Factor Markets

Sharecropping occurs when a peasant farmer uses the landowner’s farmland in exchange for a share of food output,
such as half of the rice or wheat grown.

Issues in sharecropping:
 The poor incentive structure of sharecropping lends itself to inefficiency. (Alfred Marshall)
 Monitoring Approach (Steven Cheung)
 Screening Argument (if high ability then take pure rental)
 Empirical evidence for inefficiency; comparing same farmer, controlling for soil (Radwan Ali Shaban)
 Giving sharecroppers a larger share of the produce and security of tenure on land can increase efficiency.
Interlocking Factor Markets. Factor Markets whose supply functions are interdependent, frequently because different
inputs are provided by the same suppliers who exercise monopolistic or oligopolistic control over resources.

Diversified (mixed) farming. The production of both staple crops and cash crops and simple animal husbandry typical of
the first stage in the transition from subsistence to specialized farming.

Specialized Farming. The final and most advance stage of the evolution of agricultural production in which farm output
is produced wholly for the market.

Improving Small Scale Innovation:

 Technology and Innovation
 Institutional and pricing policies for providing necessary economic incentives.
 Adapting new opportunities and new constraints
Scale-neutral. Unaffected by size; applied to technological progress that can lead to the achievement of higher output
levels irrespective of the size of a firm or farm.

Conditions for Rural Development:

 Land reform
 Supportive polices
 Integrated development objectives

Land Reform. A deliberate attempt to reorganize and transform agrarian systems with the intention of fostering a more
equal distribution of agricultural incomes and facilitating rural development.
 ECONOMIC DEVELOPMENT
CHAPTER 9:
AGRICULTURAL TRANSFORMATION AND
RURAL DEVELOPMENT

Submitted by:
Maniago, Jyle Mareinette
Paez, Rheste

Submitted to:
Ms. Hazelline Feliciano Domingo