Lecture%205%20Don%20DeVoretz

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Lecture 5Don DeVoretz

• Agriculture
• A Strategy for Development

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Roles for Ag in Development

• Raise income per capita with productivity
• Increases income equality
• Reduces rural urban migration
• Reduces population growth rate
• Reduces food imports, perhaps raises exports

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Role of Demand

• Factors that lead to shortage
• 1. Population Growth of 2.0 per annum
• 2.Growth in income per capita of 2.5 and
• 3. Elasticity of demand for foodstuffs of unity
• Leads to annual increase in demand of 4-5 per
  annum

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Role of Supply

• 1. Tenurial arrangements
• How is productivity affected by ownership of
  land?
• What is APP of land, labour and capital by tenure
  ?
• 2. Economies of Scale
• Is large more productive than smaller?
• Is there an optimal size for operation ?
• 3. Agricultural production functions
• what is role of labor, land and technology?
•  4. Technical Change
• What is labour bias in technical change ?

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Average Productivity and Tenure

• What is optimal size ?
• Equalize MPP per unit cost
• If cost of land and capital same then X is
  optimal size

APP input
APP Cap
APP Land
X
X
Hectacres
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Scale Economies in Ag

• Start at C, small scale
• Move to B,
• Note K-Land ratio constant
• Note large increase C-B
• Move B to A
• Note K-Land ratio constant
• Note B-A less
• Conclusion, increase inputs by t does output
  increase by more or less t?

Land
A
B
C
Capital
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Green Revolution 3 Generations

• 1. First Generation Seed Revolution
• Mexico, Wheat productivity 1950s
• Philippines, Rice IR8 and mariculture 1960s
• India and Pakistan, Wheat, cotton 1970 to 1980s
• Africa, upland rice failed
• 2. Second generation
• Fertilizer pesticide
• tube well
• credit
• and marketing problem
• 3. Third generation Regional equity,
  income distribution and displace worker.

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Green Revolution 3rd Generation

• Third generation all problems
• Regional equity, north-south issue
• Productivity differences
• no land taxes in northern India
• income distribution
• Wage labour and rise in land value
• and displacement of worker to urban areas

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Historical Growth Patterns

• Annual Change in Per Capita Food output 1950-1996
• Region LA F.E. N. E. Africa LDC
• 1948-60 .4 .8 .7 .0 .6
• 1960-70 .6 .3 .0 -.7 .1
• 1970-80 .9 .7 .7 -1.2 .5
• 1980-94 .8 1.7 1.3 .0 .9

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What Does above tell us ?

• 1.In general, improvement for LDCs 1970-96
• 2.Large differences, Africa versus Far East
• Implications
•     Poverty in rural sectors has increased in
  Africa and most of Near East.
• N Note 68 of African population is on land and
  only produce 20 of GDP
• 3. Why do these differences arise ?
• a. Population growth
• b. technological change
• c. land tenure

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Productivity Gap

• Country Kilos grain per hec Pop
• Japan 6,119 125m
• USA 5,136 263
• Bangladesh 2,602 120
• Mexico 2,506 92m
• India 1,943 929m
• Nigeria 1,172 111m

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What Causes Productivity Gap?Risk Aversion

• Why is technique A which is less productive than
  technique B Choosen ?
• Technique B Is Feed, Fertilizer Revolution
• Need Credit, irrigation and no pests
• There are no insurance schemes
• Failure is starvation

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Risk-Productivity Trade-off

• Both Mean of 8
• Range of A
• 6 to 10
• Range of B
• 4 to 16
• Mean Variance of
• A is 8/8 1
• B is 8/10 .8

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Tenure and Productivity
Country Mini output Mini of land Latifundio
output Latifundio of land Argentina 43.2 3.4
.8 36.9   Brazil 22,5 .5 4.7 59.5   Chile 3
6.9 .2 6.9 81.3   Peru 88.0 7.4 1.1 82.4  
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Policy Issues

• Would land redistribution
• Raise output ?
• Lower output ?
• Increase equality ?
• Lead to more democracy or violence ?

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