Tuesday, April 26, 2011

How agriculture supports structural transformation?

“After 20 years of neglect by international donors, agriculture is now again in the headlines because higher food prices are increasing food insecurity and poverty. In the coming years it will be essential to increase food productivity and production in developing countries, especially in Sub-Saharan Africa and with smallholders. This however requires finding viable solutions to a number of complex technical, institutional and policy issues including land markets, research on seeds and inputs; agricultural extension; credit; rural infrastructure; storage; connection to markets; rural nonfarm employment and food price stabilization. This paper reviews what the economic literature has to say on these topics. It discusses in turn the role played by agriculture in the development process and the interactions between agriculture and other economic sectors; the determinants of the Green Revolution and discuss the foundations of agricultural growth; issues of income diversification by farmers; approaches to rural development; and finally issues of international trade policy and food security which are at the root of the crisis in agricultural commodity volatility in the past few years.”

Read the full paper by Dethier and Effenberger (2011). Structural transformation is usually thought of as moving labor and production from agriculture to industrial sector. Development of agriculture sector would facilitate structural transformation. But, development of agriculture itself plays a vital role in bringing about structural transformation. They key is to raise productivity by using a range of factors, such as new technologies, farm size and access to land. The most difficult are institutional challenges related to market failures, missing markets and property rights. They argue that because agriculture links to small cities and rural areas, it can also be an engine of growth and provide employment opportunities for the rural non-farm economy.