Agricultural Technology, Productivity, and Poverty

in Madagascar

Bart Minten Chris Barrett

February 2006

Presentation Outline

1. Introduction 2. Conceptual framework3. Data and methodology4. Descriptive statistics 5. Price and real wage effects 6. How to improve agricultural

performance?7. Simulated impacts of

alternative policy interventions

8. Conclusions

1. Introduction Most of the poor (in Madagascar) lives in rural

areas Most of the rural poor are employed in

agriculture, sometimes as farmers, sometimes as agricultural laborers, sometimes both.

All the poor eat. So all are consumers. Many poor producers are actually net buyers .

Because the poor are both consumers and (often) producers, sometimes wage laborers, the effects of agricultural technology adoption and productivity improvements on the poor follow multiple pathways.

Need to trace out these various pathways.

2. Conceptual framework

Three sub-populations: Net food sellers

Net food buyers

Unskilled workers

2. Conceptual frameworkThree pathways through which exogenous

changes in agricultural productivity affect the poor:

Effects on prices. In isolation, price effects of productivity improvements benefit only net food buyers.

Effects on incomes through farm profits: if output expands faster than prices fall, net food sellers gain.

Effects on real wages through induced change in labor demand and prices: if MRPL increases, employment and wages increase, benefitting unskilled workers.

3. Data and methodologyData sources:1. 2001 Commune census (Cornell/FOFIFA/INSTAT)2. 2001 National household survey, EPM (INSTAT)3. 1993 Population census (INSTAT)4. Secondary geographic data on climate, soils,

altitude (various Malagasy sources)

We take communes (N=1392) as unit of analysis and rice as the focal crop.

Use regression analysis with Conley correction for spatial autocorrelation and heteroskedasticity and prospective endogeneity of key regressors.

4. Descriptive statistics

Net marketable rice surplus and poverty

Table 1: Net buyers and sellers of rice in Madagascar

Total % of households Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5Of the total rural populationProducers of rice 70 82 79 74 69 44Net buyers of rice (in value terms) 67 67 64 67 64 74Net sellers of rice (in value terms) 25 22 28 25 30 20Of the rice producersHhs that both bought and sold rice during year 33 35 37 36 29 23Net buyers of rice (in value terms) 55 61 58 56 49 48Net sellers of rice (in value terms) 36 27 35 34 42 42Source: Own calculations based on 2001 National Houshold Survey, INSTAT* Quintile 1=poorest quintile; Quintile 5=richest quintile; poverty measures based on consumption expenditures

Poverty quintile*

The relationship between household marketable rice surplus and poverty is weak because of occupational choice (rich less likely to be rice farmers).

4. Descriptive statistics

Agricultural wage rates (FMG/day)

Province Female Male

Antananarivo 5765 6440

Fianarantsoa 4579 5156

Toamasina 6605 6819

Mahajanga 8913 9798

Toliary 7449 8244

Antsiranana 13353 14773

Total 6817 7551

There exists a strong inverse relation between wages and poverty indicators within/between provinces in Madagascar.

Percentage of population who are food insecure

4. Descriptive statistics

Duration of annual soudure

4. Descriptive statistics

5. Price and real wage effects

Determinants of poverty/food insecurity

Results : Doubling rice yield lowers # food

insecure by 38% and shortens lean period by 1.7 months

Presence of cash crops reduces poverty indicators

Remoteness increases poverty: 1st-5th quintile means 10% more food insecure and 0.7 months longer lean season

Rice yields: Yield elasticity of price = 31-45% (18-26%) in harvest (lean) periods

Remoteness reduces harvest period prices and raises lean period prices (hurts both net buyers and net sellers)

Seasonal harvest concentration reduces prices, especially in lean season (30-50%)

Physical insecurity drives prices down, especially in harvest period

Cash crop presence drives up rice prices

5. Price and real wage effects

Productivity and prices

Rice yields: doubling rice yields, increases real wages 65-89%. Coefficient estimates on prices and

wages imply induced labor demand during growing season (difference between OLS and IV estimates)

Cash crops: increase real wages Remoteness: negative effect,

especially in harvest period

5. Price and real wage effects

Productivity and real wages

Increasing rice yields has a strong, positive effect on food security among all the poor: Rice prices fall 18-45%, benefitting net buyers Output increases faster than prices fall,

benefitting net sellers (capture 10-60% of productivity gains)

Labor demand and real wages increase 65-89%, benefitting unskilled workers.

Remoteness hurts everyone (lower harvest period prices for net sellers, higher soudure prices for net buyers, lower real wages)

Cash crops: ambiguous results: help unskilled workers and net sellers but hurt net buyers (i.e., small rice farmers)

5. Price and real wage effects

Summary

6. How to improve agricultural performance?

Rudimentary production systems

Very low rates of adoption of chemical fertilizer (6%), organic fertilizer (36%), improved seed (10%), SRI, etc.

Given strong positive effect of these agronomic enhancements on rice yields and the positive role rice yields play in advancing food security, key policy question is: How to stimulate greater uptake and increase

rice yields?

6. How to improve agricultural performance?

Direct and indirect effects on rice yields

Strong, positive direct effects on rice yields from fertilizer, improved seed, SRI, improved NRM, agricultural equipment, livestock, and irrigation.

Strong, positive indirect effects on rice yields – via induced uptake of agricultural intensification technologies – through irrigation, access to markets, and literacy.

% Commun

es

Estimated changes

Rice price

Real wage

1. Increase rice yields 1 ton/hectare

100 -20% +37%

2. Adopt flood resistant varieties 34 -9% +11%

3. Adopt drought resistant varieties

30 -9% +9%

4. Adopt high altitude varieties 21 -3% +6%

5. Adopt short cycle varieties 41 -8% +14%

6. Adopt rice flea resistant varieties

36 -7% +15%

7. Bring all communes to least remote quintile

89 +8% +15%

7. Simulated effects of alternative policy interventions

7. Conclusions

Adoption of improved agricultural technologies – so as to increase rice yields and demand for unskilled agricultural labor – aids all types of the rural poor and food insecure:

1) Net sellers2) Net buyers3) Unskilled workers

7. Conclusions

No magic bullet nor striking new approach:

Stimulating agricultural productivity improvements – and improving rural market access – are familiar tasks with high payoff in terms of broad-based poverty reduction.

Need long-term commitment to rural and agricultural development based on technological change.

Thank you for your comments and

time!