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2012 US SoFA Launch "Public Investment in & for Agriculture - What Has it Acheived & What Determines It?"
 

2012 US SoFA Launch "Public Investment in & for Agriculture - What Has it Acheived & What Determines It?"

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US Launch of The State of Food & Agriculture 2012 at IFPRI "Investing in Agriculture for a Better Future". Presentation by Tewodaj Mogues, IFPRI.

US Launch of The State of Food & Agriculture 2012 at IFPRI "Investing in Agriculture for a Better Future". Presentation by Tewodaj Mogues, IFPRI.

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    2012 US SoFA Launch "Public Investment in & for Agriculture - What Has it Acheived & What Determines It?" 2012 US SoFA Launch "Public Investment in & for Agriculture - What Has it Acheived & What Determines It?" Presentation Transcript

    • IFPRI Policy Seminar Washington DC launch of FAO’s State of Food and Agriculture 2012: Investing in Agriculture for a Better Future 22. January 2013Public Investment in and for Agriculture: What Has it Achieved, and What Determines it? Tewodaj Mogues International Food Policy Research Institute (IFPRI)
    • Outline PublicDetermining Investments in Outcomes factors and for Agriculture
    • What do we Know about the Impacts of Public Investments in and for Agriculture?
    • What do we Know about the Impacts ofPublic Investments in and for Agriculture? PublicDetermining Investments in Outcomes factors and for Agriculture
    • What do we Know about the Impacts of Public Investments in and for Agriculture?• Study is comprehensive review of academic literature on this topic• Based on both IFPRI research and other research• IFPRI work on public investments in agriculture pioneered by Shenggen Fan starting late 1990s and onward; seminal literature by Fan, Peter Hazell, Xiaobo Zhang (and other co-authors)• In this presentation, only selected highlights of the review study discussed
    • Returns to Investments across Sectors: Agricultural Performance• Ag. R&D investments consistently greatest returns• Returns to other ag. investment (irrigation) positive but often surpassed by non-ag. investment returnsGraphical illustration of estimation results from: Fan, Zhang and Zhang (2004); Fan Hazell andThorat (2000); Fan, Yu and Jitsuchon (2008); Fan and Zhang (2008)
    • Returns to Investments across Sectors: Agricultural Performance Ranking of dollar-for-dollar returns in different types of public investments (1=highest) Sector Ghana Uganda Ethiopia Tanzania Agriculture 1 1 3 1 Education 4 2 2 3 Health 3 4 4 n/a Roads 2 3 1 2 Chapters in: Mogues, Benin [eds.] 2012 (book): * Benin, Mogues, Cudjoe & Randriamamonjy; * Fan & Zhang; * Mogues; * Fan, Nyange & Rao.• Diversity across countries in relative returns across sectors• In some cases, aggregate public spending in agriculture appears to have low or insignificant impact on incomes and welfare (e.g. Mogues 2011; Easterly & Rebelo 1993; Milbourne et al. 2003; Mosley et al. 2004)
    • Returns to Investments across Sectors: Poverty Reduction• No apparent trade- off between ag. growth and poverty reduction, in terms of contribution of ag. R&D• But for poverty, other types of investment can be more important than R&D (but latter remains close second) Graphical illustration of estimation results from: Fan, Zhang and Zhang (2004); Fan Hazell and Thorat (2000); Fan, Yu and Jitsuchon (2008); Fan and Zhang (2008)
    • Returns to Subsidies vs. Investments across Time 1960s-70s 1980s 1990s Credit subs Credit… Credit subs Power subs Power… Power subsFertilizer subs Fertilizer subs Fertilize…Irrigation subs Irrigation subs Irrigatio… R&D R&D R&D Irr. Investm. Irr. Investm. Irr.… Edu. Edu. Edu. Roads Roads Roads 0 2 4 6 8 10 12 14 16 18 20 0 1 2 3 4 5 6 7 8 90 1 2 3 4 5 6 7 8 9 10 • In early stages of green revolution, returns to spending on subsidies were similar to that of investment in public goods • In subsequent decades, while overall returns to investments declined somewhat, they remained very high • Over time, the marginal contribution to subsidies started to fall behind returns to public goods spending Graphical illustration of estimation results from Fan, Gulati, Thorat (2008)
    • Returns to Investments across High- and Low-Potential Areas• Marginal impact on (i) agricultural productivity, and (ii) poverty reduction• Examples from: India, China, Uganda• Effects of public investments are generally higher in marginal areas than in ‘high-potential’ areas within the country• True not only in terms of poverty reduction but also agricultural performanceFan, Hazell and Haque (2000); Fan, Zhang and Zhang (2004), Fan and Zhang (2008)
    • Agricultural Productivity Poverty Reduction _80 60 Irrigated70 INDIA Rainfed, hi qual. 5060 Rainfed, low qual. 405040 3030 202010 10 0 0 HYV Roads Canal irr. Electr. Educat. HYV Roads Canal irr. Electr. Educat.12 Coastal 2810 CHINA Central 24 Western 8 20 16 6 12 4 8 2 4 0 0 R&D Irr. Roads Edu. Electr. Tel. Pov. R&D Irr. Roads Edu. Electr. Tel.16 200 Central14 UGANDA East 16012 West10 North 120 8 80 6 4 40 2 0 0 R&D Edu Feeder R. Health R&D Edu Feeder Murram Tarmac Health R. R. R.
    • Returns to Investments across High- and Low-Potential Areas• Marginal impact on (i) agricultural productivity, and (ii) poverty reduction• Examples from: India, China, Uganda• Effects of public investments are generally higher in marginal areas than in ‘high-potential’ areas within the country• True not only in terms of poverty reduction but also agricultural performanceFan, Hazell and Haque (2000); Fan, Zhang and Zhang (2004), Fan and Zhang (2008)
    • What Drives Public Investments in and for Agriculture?
    • What Drives Public Investments in and for Agriculture? PublicDetermining Investments in Outcomes factors and for Agriculture
    • Public Investment Decisionmaking and its Determinants – A Conceptual FrameworkAdapted fromMogues (2012)
    • Processes of Budgetary Decisionmaking• Formal procedures and informal/ de-facto processes• ‘Garbage-can budgeting’ model: Allocations are random (Cohen et al. 1972)• Budgetary model of incrementalism: Inertia and path- dependency in investment decision-making (Davis 1971; Cowart et al. 1975; Ostrom 1977, Foelscher 2007a, 2007b)• Budget implementation (vs. approved budgets) • E.g. in Nigeria, on average 21 % of agricultural budget never spent (Mogues et al. 2012) • Striking results from public expenditure tracking surveys (e.g. Uganda) (Reinikka & Svensson 2004) • Sudden revenue short- (or wind)falls; use of funds for other purposes; leakages/corruption; etc.
    • Role of Various Actors in Public Investment Decision-making• Policymaker as benevolent and unencumbered social planner? (Tridimas 2001; Reddick 2002)• Politicians vs bureaucrats (Niskanen 1971)• Strength of ‘interest groups’ to lobby for provision of public investments benefiting them is larger when • ‘Interest groups’ more spatially concentrated  dispersed agricultural households vs. concentrated urban residents (Olson 1985) • Better access to transport and communications infrastructure  urban vs rural • Size of group small  agricultural population much larger in many developing countries, reverse in rich countries (Olson 1965) • Average income and education of group member is higher  low among smallholder agricultural households (Binswanger & Deininger 1997; Krueger 1996)
    • Characteristics of Public Investments• Attributability of investments to conscious decisions made by politicians (e.g. visibility, “markability”) (Keefer & Khemani 2005)• Temporal features of public investments • Long lag perturbs attributability • Lag of investments vs. political cycle • Time allows for “things to go wrong”
    • Policy Considerations
    • Policy Considerations: Impacts of Public Investments• Compelling evidence on the high social returns to public investments in agricultural research & technology• Policymakers should choose judiciously between different agricultural subsectors and functions (blanket recommendations to invest more in “agriculture”, vs. in high-payoff activities within the sector)• Time-dimensions of public investment effects: • Gains in some investments may materialise only in a longer time-horizon; take that into consideration when evaluating payoff • Relative returns do not remain static over time, thus policy priorities should change as well• Gains are heterogeneous across space: undertake spatially differentiated policies/investments
    • Policy Considerations: Determinants of Public Investments• Is there some value in incrementalism models? Identify what tends to break inertia and path dependency in order to be able to use windows of policy opportunities• Revisit validity of the notion of ‘unencumbered benevolent social planner’• Development interventions strengthening cooperatives/ farmers’ unions may have additional benefits beyond lowering market transactions costs• Need sharper understanding of how attributability/ visibility/ lag in agricultural public investment affect resource allocation
    • IFPRI Policy Seminar Washington DC launch of FAO’s State of Food and Agriculture 2012: Investing in Agriculture for a Better Future 22. January 2013Public Investment in and for Agriculture: What Has it Achieved, and What Determines it? Tewodaj Mogues International Food Policy Research Institute (IFPRI)