ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE
Cities and agricultural transformation in Ethiopia
Joachim Vandercasteelen, Seneshaw Tamru, Bart Minten and Johan Swinnen
IFPRI ESSP
EEA, July 21st, 2011Addis Ababa, Ethiopia
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1. Introduction
• Agricultural transformation in Africa deemed important but progress has been slow
• Several hypotheses explaining agricultural transformation:1. Boserup-hypothesis
2. Induced innovation theorem
3. Market driven intensification
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1. Introduction • Urbanization important new factor
Cities of more than 300,000 people 1975 2000 2025
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1. Introduction
• Some numbers:- People living in cities in Sub-Saharan Africa increased by 160%
between 1990-2014- Urban population in Africa expected to triple by 2050 (1.3 billion
people)
• Urbanization important economic impacts, associated with structural transformation
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1. Introduction • Important effects on agriculture and food markets:1. Urban residents often do not grow own food2. Urban residents have different diets3. Urban residents richer and willing to pay more for food
• Most of the literature focused on changes in crops or off-farm employment
• Relatively little evidence on impacts on staple crops
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1. Introduction
• Look at the case of Ethiopia and at teff• Question: “How does proximity to urban centers affect farmers’
agricultural production environment and practices?”• Important changes in Ethiopia in this area
1996/1997 2010/2011
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1. Introduction
• Urbanization: 3.7% to 14% between 1984 and 2007
• One quarter of the urban population living in Addis
• In 2012: 17% in cities
• Projections urban population:- 5.4% annual growth- Urban population to increase from 15.2 in 2012 to 42.3 million in 2034- In 2028: 30% of population in cities
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2. Background on teff
• 23% of total grain area• Most important crop in value terms in the country (2.5 billion USD in
2013/14)• Most important cash crop in the country (750 million USD) • Teff more readily eaten by urban consumers• High income elasticities• Rapid growth of cities and income growth leading to increasing
demand for teff
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3. Methodology • Stratified random sample in 2012
• 1,200 farmers in five major teff production zones.
• Urban proximity main independent variable; two components: Cost of transporting teff:
1/ From the farm to the market center2/ From the market center to the Addis wholesale market (by truck)
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4. Non-parametric regressions - Advantage: No functional form specified in advance
- Local polynomial smoothing estimates
- Do for three major outcomes:1. Prices2. Input3. Intensification
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4. Non-parametric regressions - prices
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4. Non-parametric regressions – use of inputs
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4. Non-parametric regressions – intensification
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5. 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; smaller farms not associated with higher farm incomes per hectare
• We find overall a strong direct effect (not only through prices)
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6. Explaining the direct effect• Channel 1: Transaction costs
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6. Explaining the direct effect• Channel 2: Monetization of production factors
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6. Explaining the direct effect• Channel 3: Access to information and knowledge
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7. Conclusions • Link of urban areas with rural hinterland not well understood
• Study agricultural linkages in the case of Ethiopia, where larger share of the rural population “connected” to a city
• Strong positive effect of urban proximity on:- Output prices but also on wages and land rental rates
- Input and factor market use
- Labor and land productivity
- Profitability
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7. Conclusions
• Important effect of prices (“indirect effect”)
• However, other effects matter significantly as well (transaction costs, knowledge, information) (called “direct effect”)
• Beneficial effect of urbanization on intensification by rural producers of staple crops
• In contrast to rural population increases (population density increases)
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7. Conclusions
• Implications:
1. Ensure appropriate infrastructure and low transportation costs
2. Ensure that cities can grow
3. Ensure that appropriate inputs and knowledge are available