Livelihood protection and promotion in agriculture: making the connection

1
Livelihood protection and promotion in
agriculture making the connection

• John Farrington
• Department for International Development
• London

2
Impacts of agricultural growthon poverty
in theory

• Through
• profitability gains for farmers
• labour market gains for labourers
• product prices for consumers
• knock-on effects on demand (inputs,
  processing, marketing), leading to second round
  investments
• increase in tax yields and formal transfers
• Increased informal transfers to those
  chronically unable to engage in the productive
  economy

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Impacts - evidence

• Large body of evidence on impacts of agricultural
  productivity growth
• Irz et al, 2003 each 1 growth in agricultural
  productivity generates a decrease of between 0.6
  and 1.2 in those living on less than 1/day
• Hazell and Haddad, 2001 including discussion of
  pro-poor agricultural research prioritisation
• Dorosh and Haggblade, 2003 investments in
  agriculture generate the highest impacts on the
  poor in sub-Saharan Africa

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Transmission mechanisms through growth and
markets - questions and issues

• How well do markets work? For whom? market
  failure is the norm, not the exception, in many
  parts of Africa (Omamo, 2003)
• conventional features of market failure
  transaction costs raised through lack of
  transport and communications infrastructure, weak
  contract enforcement, moral hazard, inadequate
  insurance markets, high risks which cannot be
  insured against, externalities, increasing
  economies of scale, highly imperfect
  competition..
• overall overhasty liberalisation in SSA
  neoliberal facilitating and regulating not
  enough
• not enough attention given to segmentation and
  interlocking

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Impeded transmission via markets segmentation

• any form of non-economic discrimination does
  not include discrimination by skills,
  productivity, actuarial risk (in finance and
  insurance markets), but does include
• Gender discrimination paying less to women than
  can be justified on productivity grounds
  intra-household constraints on womens choice
• Discrimination on basis of religion or ethnicity
  (e.g. against tribals in India)
• Discrimination on basis of social status (e.g.
  caste system in India)

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Improving transmission by reducing
entrepreneurial risk trampolines
Risks are shocks and stresses either external or
internal to the HH vulnerability is the HHs
capacity to withstand or cope with these World
Bank Social Risk Management Framework as a means
of reducing risk and vulnerability, covers
covariate and idiosyncratic risk covers
prevention, mitigation and coping. Covers
different policy levels, stressing that even the
highest level policies (fiscal, investment.),
and sector-based policies (e.g. agriculture) can
combine growth and protection
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SRM framework suggestedmodifications

• Needs first to insist on mainstreaming of risk
  reduction in high-level economic management
  and..
• .in the identification of appropriate
  trade-offs between growth and protection within
  the productive sectors
• This then defines the scope for additional
  measures such as insurance, or pure SP via
  Welfare Depts to cover the residual
• Even then, there may be trade-offs within SP
  that are more or less growth promoting
• Need to be explicit about treating
  entrepreneurial and domestic shocks and stresses
  coherently
• Needs to differentiate responses by type of rural
  household

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Transmission via transfers to the chronically poor

• Many examples food for work, pensions,
  allowances.
• transfers in food or in cash?
• cash transfers have advantage of enhancing
  demand in local markets food transfers may
  diminish it even the chronically poor engage as
  consumers
• robust transfer mechanisms involve automated
  payment of small amounts with minimal scope for
  discretion by local officials
• evidence that some transfers (e.g. social
  pensions in S Africa) are used in part for
  productive purposes (investment in ag investment
  in grandchildrens education.) AND release
  informal transfers for productive investment

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Operationalising SRM 1

• 12 Guidelines
• Identify how far is impact on R and V considered
  in high-level policy (fiscal, trade, MTEFs,
  infrastructure)?
• Ditto re policies in the productive sectors
• Identify how/how far can e.g. insurance
  complement production-focused measures?
• Ask who is covered by the above? Who is not, and
  what do they need? Transfers?
• Ask how does risk, and the factors affecting it,
  vary across provinces (consider agro-ecological
  conditions, market integration, ethnicity, social
  networks)
• Ask how and how far do gender, age, marital
  status, asset status etc influence vulnerability?

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Operationalising SRM 2

• Identify how coherence in reducing risk and
  vulnerability between domestic and
  entrepreneurial spheres can be achieved?
• Use donor fora and PRSPs to discuss options
• Experiment with new ways of making growth
  policies more protecting and SP policies more
  growth promoting
• Generate new knowledge (eg on changing role of
  informal transfers)
• Build capacity
• Identify policy processes (windows, pegs,
  champions) in relation to all the above

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Conclusions

• Agricultural growth is important for poverty
  reduction, BUT facilitating and regulating not
  enough, AND.
• Market imperfections are pervasive and need to be
  addressed to enhance the poverty-reducing impacts
  of agriculture. High risk is paramount among
  these
• New ways of managing risk and vulnerability
  (across domestic and entrepreneurial spheres)
  need to be found.
• Efforts in this direction need to be
  differentiated according to type of rural
  household

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• References
• Deshingkar, P and Farrington, J (forthcoming)
  Market segmentation and interlocking in Andhra
  Pradesh and Madhya Pradesh, India. Natural
  Resource Perspectives Paper. London ODI
• Dorosh, P and Haggblade, S (2003) Gropwth
  linkages, price effects and income distribution
  in sub-Saharan Africa. Journal of African
  Economies, 12 (2) 207-235
• Duncan, A et al (2003) Drivers of Change
  reflections on experience to date. Paper for DFID
  workshop, Oxford, June 23 2003. DFID Drivers of
  Change Team
• Farrington, J (2004) Social protection and
  livelihood promotion in agriculture towards
  operational guidelines. Paper for OECD Povnet.
  DFID NR and Agriculture Team, London
• Hazell, P and Haddad, L (2001) Agricultural
  research and poverty reduction. 2020 Brief 70.
  Washington DC IFPRI.
• Hess, U (2003) Innovative Financial Services for
  Rural India Monsoon indexed lending and
  insurance for smallholders. Agriculture and Rural
  Development Department Working Paper 9,
  Washington DC World Bank
• Irz, X, Lin Lin, Thirtle, C and S Wiggins (2001)
  Agricultural productivity growth and poverty
  alleviation. Development Policy Review 19(4)
  449-466.
• Omamo, SW and Farrington, J (2004) Policy
  research and African agriculture time for a dose
  of reality? Natural Resource Perspectives No. 90.
  London ODI