south east asia development 3b pdf

Role of agriculture in development Implications of land scarcity The Green Revolution Growth and distributional impacts of the GR Food security and other discussion... Importance of

3b Agricultural development

and food security

1

Role of agriculture in development

Implications of land scarcity

The Green Revolution

Growth and distributional impacts of the GR

Food security and other discussion

Importance of agricultural growth

 Ensure food supply and/or save foreign exchange

 Achieve food self-sufficiency in closed economies; in open economies, earn export revenues or save foreign exchange

 Generate labor surplus

 Potential rural-urban migrants to supply non-ag labor force

 Fiscal and financial surpluses

 Private savings from ag profits

 Public savings from ag taxation

 Demand ‘linkages’

 Where purchasing power is sufficient, ag growth raises

demand for output of other sectors

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Consequences of lack of agricultural growth

rates around 3% in 1960s-70s

 Rising demand for food – and jobs

Arable land is limited in supply: area per person

falling

Ag uses land and labor to produce food – so just use intensify labor use on existing land! But…

 lower L productivity

 lower increases in food output

 falling real wages

 economic distress and political unrest

Land is less equally distributed than income

Gini coefficients for inequality of income and land ownership:

E Asia and Pacific 1950s 1960s 1970s 1980s 1990s Income 0.35 0.34 0.34 0.35

Land 0.45 0.47 0.49 0.50 0.41

Source: Deininger and Squire, J Devel Econ 1998

Note: Gini measures inequality: most equal = 0 < G < 1 = most unequal

 Ag stagnation with growing

pop’n:

 Decline of ag output per capita

will raise food prices and VMP of

labor in agriculture - when

measured in terms of industry

price

 This will slow rate of transfer of

L to industry, raising unit labor

costs and reducing industrial

profit rate and savings (diagram)

– “Ricardian hell”: steady state

with subsistence wage (due to

dim returns) & zero net additions

to capital stocks

• Where will surpluses then be

concentrated?

w/pM

Labor in industry

L supply (from ag.)

Industrial

L demand

Getting agriculture moving

Get more effective land area:

 Expand at frontier where available (Thailand, parts of

Indonesia outside Java)

 Irrigate suitable areas – double cropping

Adopt land-saving technologies – raise yields per unit of

land

 Green Revolution = package of land-saving technologies

 Increased food output  prevented famine

 Raised labor productivity

Lowered food prices  raised real wages for urban workers

 Lowered relative value of land  defused some political

conflict

What is needed for agricultural growth?

If using traditional technology

 More inputs of land, labor

 Problem: shortage of land, in spite of irrigation

investments

If making a shift to new technology

 More capital (embodied in fertilizer, seeds, farming skills)

 Problems: capital shortages, research leads and lags, complementary inputs (rural credit)

In SE Asia, 1960s-70s, land-abundant economies

took 1st option; land-scarce economies took 2nd

option

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Green Revolution in Asian rice

International Rice Research Institute

(Philippines) founded 1960

New rice plant types (1965 +)

Developed by international researchers

(technology transfer)

More nitrogen-responsive (fertilizer-using)

Non-photoperiod sensitive (non-seasonal,

shorter growing season)

Thus more output per unit of land planted

GR largely solved problem of land scarcity in

Asia from 1970s to 1990s

Yields rose fastest in land-scarce economies

Growth rates (% per year) of rice output, area, & yield

(Philippines/Indonesia: land-scarce, net importers,

Thailand: land-abundant, net exporter)

 In food-importing countries, early output growth relied equally on yield growth and area expansion

In later years, growth in land-scarce economies

1955-65 1965-87 Output Area Yield Output Area Yield Philippines 2.3 0.9 1.4 3.8 0.2 3.6 Indonesia 1.5 0.7 0.8 5.3 1.3 4 Thailand 6.7 2.8 3.9 2.5 2 0.5

The green revolution in a Philippine village

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Institutions matter! The case of Vietnam

 Access to modern inputs – such as new varieties of rice

 Access to markets, storage, and processing facilities

 Security of land tenure – investment incentives, credit

access

 Restrictions on land use and farm consolidation

periods of rapid reform, and has slowed when pace of reform slowed down

 Improved terms of trade for ag have caused TFP growth

 And had indirect benefits – children in school (Haughton)

 Secure property rights associated with higher yields

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Topics for discussion

Distributional consequences of the GR

 Symbiosis: land reform is easier where GR gains

largest

 Why? Ricardian process in reverse: effective land area increase makes it less scarce, raises labor productivity

Purchasing power and food security: agricultural

prices in general equilibrium

Food self-sufficiency vs food security: economics or politics?

Food prices are now rising again: time for a second Green Revolution?

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Tomorrow: global shocks, local responses

 Theory review: non-traded goods and the real exchange rate (look at Corden and Neary article from Brad’s class)

 Dutch Disease

 Policies to address D.D.

Debt and development: the Philippine currency crisis

 Global shocks and macroeconomic imbalances

 Dealing with imbalances: accommodate or adjust?

Review and Q&A