ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

Cities and agricultural transformation in Ethiopia Joachim Vandercasteelen, Seneshaw Tamru, Bart Minten and Johan SwinnenIFPRI ESSP

Transformation and vulnerability in Ethiopia: New evidence to inform policy and investmentsGetfam HotelMay 27, 2016Addis Ababa

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Introduction Transformation of agriculture deemed

important but progress has been slow in Africa

Urbanization – a new factor for transformation in Africa

City dwelling in Sub-Saharan Africa increased by 160% between 1990-2014

Urban population in Africa expected to triple by 2050

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Why study this? Most research focused on changes in

crops or off-farm employment

Little evidence on impacts on staple crops, that most of the rural population makes a living from

Therefore, Does proximity to urban centers affect

farmers’ agricultural practices?

We study the case of Ethiopia and teff

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From 3.7% to 14% between 1984 and 2007

In 2012: 17% in cities

Projections World Bank (2015): 5.4% annual growth; In 2028: 30% of population in cities

1996/1997 2010/2011

Urbanization in Ethiopia

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Ethiopia’s super crop-teff

23.4% - grain area 17.1 % - grain production

Most important crop in value terms in the country: o 2.5 billion USD in 2013/14

More demanded by urban consumers Rapid growth of cities and income

growth leading to greater demand

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Methodology Stratified random sample in 2012 1,200 farmers in five major teff

production zones 38% of national teff area 42% of the commercial surplus

Urban proximity - main independent variable (ETB/quintal):

1. from the farm to the market center2. from the market center to the Addis wholesale market by truck

Non-parametric regressions Advantage: No functional form specified

What are the relationships between proximity and different outcomes of interest?

Three major outcome variables:1. Prices2. Input3. Intensification

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Prices

1020

3040

50W

age

/ day

0 50 100 150Transport cost (Birr /Qt)

Wage (Birr /day)40

060

080

010

0012

00P

rice

(Birr

/Qt)

0 50 100 150Transport cost (Birr /Qt)

Teff price (Birr /Qt)

-200

00

2000

4000

6000

8000

Birr

/ H

a/ Y

ear

0 50 100 150

Transport cost (Birr /Qt)

Land rent (Birr /Ha/year)

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Use of inputs

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Intensification

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Multi-variate regression Strong effect of urban proximity on:

Prices Use of inputs Measures of intensification (land and labor

productivity) Profits

No strong effects of population pressure

A strong direct effect (through better transaction costs, knowledge, information)

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Explaining the direct effect• Channel 1: Transaction costs

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Explaining the direct effect• Channel 2: Monetization of production factors

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Explaining the direct effect• Channel 3: Access to information and

knowledge

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What did we find? Strong positive effect of urban

proximity on: output prices, wages, land rental rates, input use, and profitability

Strong indirect effect - changing price ratios of factor and output prices

Strong direct effect -transaction costs, knowledge, information

No significant effect of rural population increases (population density increases)

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Implications1. Market access matters for rural populations

- ensuring appropriate infrastructure and low transportation costs

2. Cities - engine for agricultural transformation

- ensuring that cities can grow, e.g. stimulating rural-urban migration and improved tenure conditions.

3. Access to inputs and knowledge

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THANK YOU!