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Rural-Urban Linkages for Growth, Employment and Poverty Reduction
 

Rural-Urban Linkages for Growth, Employment and Poverty Reduction

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World Bank Rural Day, Washington, DC

World Bank Rural Day, Washington, DC
November 9, 2006

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    Rural-Urban Linkages for Growth, Employment and Poverty Reduction Rural-Urban Linkages for Growth, Employment and Poverty Reduction Presentation Transcript

    • Rural-Urban Linkages for Growth, Employment and Poverty Reduction Joachim von Braun International Food Policy Research Institute World Bank Rural Day Washington, DC November 9, 2006
    • Outline 1. Concept: Rural / urban “linkages” and “divides” 2. Old and new rural-urban linkages 3. Ways forward Joachim von Braun, IFPRI, Washington DC, November, 2006
    • The development goals and economics of rural-urban linkages So what? Lack of r/u-linkages is divisive, bad for growth, & poverty, & equity Goal: Facilitate resources to flow where they will have the largest growth and poverty reduction benefit Economics of linkages: • Cutting transactions- and transfer-cost • Stimulating externalities and spill-over effects that foster well-being Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Rural & urban: on linkages, and externalities AGRICULTURE OTHER SECTORS Infrastructure RURAL URBAN Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Rural/Urban divide still exists Ratio of Urban to Rural Capita Income 3.5 3 2.5 2 1.5 China 1 0.5 0 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2 1.5 1 0.5 India 0 51 54 57 61 65 68 71 78 88 91 19 19 19 19 19 19 19 19 19 19 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Small farms dominate world agriculture Number of farms Farm Size (ha) % of all farms (millions) <2 85 387 2 - 10 12 54 10 - 100 2.7 12 > 100 0.5 2 Total 100 456 The big transformation challenge: grow or diversify or exit Source: von Braun (2003) Joachim von Braun, IFPRI, Washington DC, November, 2006
    • The Continuum under the “divide” VERY RURAL Spatial Sectoral flows RURAL flows •Migration & •Crop/ livestock remittances SMALL TOWNS for local use •Goods, services •Input markets & waste PERI-URBAN •High value •Information agriculture trade •Resources/water •Peri-urban & VERY URBAN multi-functional (Metropolitan areas) agriculture Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Outline 1. Concept: Rural / urban “linkages” and “divides” 2. Old and new rural-urban linkages 3. Ways forward Joachim von Braun, IFPRI, Washington DC, November, 2006
    • The types of linkages 1. Technology opportunities 2. Trade, processing, and retail 3. Services and infrastructure 4. Human capital and migration 5. Environmental and natural resources Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 1. Technology opportunities - powerful and changing 1. Agriculture technology linkages (factor markets and inputs; output processing; consumption linkages) 2. ICT (and network externalities) 3. Energy (and biofuels) Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 1) The lasting “Green Revolution” story: National agricultural growth multipliers • Asia: 1.6 – 1.9 • Africa: 1.3 - 1.5 Source: a synthesis by Steven Haggblade, Peter Hazell, Paul Dorosh 2006 …are driven by research, technology, policy Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Cause for concern: Bifurcation in agricultural R&D • 80 developing countries spend a total of $ 1.4 billion on agricultural R&D = 6% of global agr. R&D expenditure • China & India represent = 22% • High income countries = 44% Toward agriculture “R&D orphans” Source: IFPRI/ASTI 2005 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • A green revolution: pioneer and challenge Ethiopia: the technical and institutional challenges can be addressed; agr. growth 2001…04: +11, -2; -13; +19% Mr. Harrar, Punjab farmer, among first adopting Green Rev. seeds in 1960s Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 2) ICT: Results at the macro level • ICTs reduce transaction costs + open markets + additional network externalities • Tele-density is positively associated with growth: - 10 more mobiles per 100 people increse GDP p.c. by 0.6% (Wavermann et.al. 2004) - Minimum threshold: around 15% to get strongest growth effects (actual is only 6% (Torero, von Braun 2005) Joachim von Braun, IFPRI, Washington DC, November, 2006
    • ICT: Results at the micro rural level e.g. households in Peru Consequences of limited rural access Estimated gains in welfare with respect to alternatives: US$ 1.62 to 2.91 per call Rural households willing to pay more than the prevailing tariff rates per local call: US$ 0.25 to 0.35 Source: Torero and von Braun 2005 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 3) Energy and biofuels: markets and technologies Changing the world agriculture and food equations and the rural - urban linkages? • New opportunities • Risks for the poor if investment in technology lags behind Joachim von Braun, IFPRI, Washington DC, November, 2006
    • World food and energy prices 1998-2006 [1995 index=100] 350 sugar crude oil 300 maize 250 rice wheat 200 150 100 50 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: IMF World Economic Outlook 2006 and UNCTAD commodity price statistics database 2006 *2006 figures were extrapolated from the difference between September 2005 and September 2006 prices. Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Scenarios: Biofuels’ crop price effects? Biofuel scenarios (not predictions) by 2020: 1. With current plans for expansion and no technological change: oilseeds ca. + 80%; maize ca. +40% 2. Like 1., but with second-generation cellulosic conversion and crop productivity increases: oilseeds ca. + 40% ; maize ca. +20% (source: IFPRI IMPACT-model scenarios, 2006, Rosegrant, Msangi) Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 2. Trade, processing and retail Trends: • Shrinking farms • Growing food processors • Even more growing retailers Issue: Linking farmers and small processors to markets Joachim von Braun, IFPRI, Washington DC, November, 2006
    • The corporate world food system, 2005 Consumers Agricultural Food input processors Food industry Farms and traders retailers top 10: $37 bln Agricultural top 10: $363 bln top 10:$777bln value added: • Syngenta $1,315 bln • Nestle • Wal-Mart • BASF • Unilever • Carrefour $4.000 billion • Monsanto 450 million • ADM • Metro AG >100 ha: 0.5% < 2 ha: 85% Source: von Braun 2005 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • High-value agricultural products • Strategies for small farmers: 1. Producer-marketing cooperatives: horizontal (coordinate, negotiate) 2. Contract farming schemes: vertical Both  are information intensive;  need legal frameworks!  cost and quality of monitoring Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Impact of contract farming on households – e.g. in Bangladesh Changes in per capita household expenditure related to contact 1300 farming 1200 (current taka of 2004) 1100 1000 900 800 700 600 500 400 Current situation Contract farming Simulated effect of contract farming Source: Chowdhury and Torero 2005 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Small farms and small businesses can participate +25 jobs From a 2 ha. rice farm to fruit processing firm in Uttar Pradesh: training (her) and banking was key; and the road Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 3. Infrastructure and services – linkages • Infrastructure - Capital intensive (transport, communications, energy, water) • Services: - Finance & credit - Insurance services in rural areas (facilitating more risky employment) Joachim von Braun, IFPRI, Washington DC, November, 2006
    • When electricity comes to the village… Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Returns to investment in roads in China Urban roads Rural roads Total GDP (Yuan for 1.55 5.99 Yuan) Urban poverty 0.05 0.19 reduction (persons per 10000 Yuan) Rural poverty 0.31 5.67 reduction (Persons per 10000 Yuan) Source: Fan et. al., 2005 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Africa: Access to roads Source: Torero 2006 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • More than one piece of infrastructure: Complementarities e.g. Peru (2002) 60% % change of PC HH Income 50% 40% 30% 20% 10% 0% Pipe water Water + Water + elect + Water + elect + electricity phone phone + road Source: Escobal and Torero, 2004. Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 4. Human capital conditioned employment linkages • Migration (seasonal and permanent) • Nutrition and health linkages • Education Joachim von Braun, IFPRI, Washington DC, November, 2006
    • BIG PICTURE: global employment 2005 – 2020 (Billions) Farm Services & Services & Total Industry Industry- Rural areas Urban areas 2005 0.9 0.6 1.5 3.0 2020 0.6 1.0 1.9 3.5 Change - 0.3 +0.4 +0.4 +0.5 2005-2020 Estimates based on ILO economically active populations projections and own estimates of sector shares, 2005 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Migration and exit from farming • Migrations as a … Risk management strategy Ease liquidity constrains in absence of insurance and credit market • From rural to urban (e.g. China) • From poor rural to more prosperous rural (e.g. West Africa) Does not work for all Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Changing neighborhood: Remittances and education Next door poor and well remittances -> <-education grant Joachim von Braun, IFPRI, Washington DC, November, 2006
    • 5. Environmental and natural resources Ecosystems changes to meet the growth in the demand for food, water, timber, fiber, and fuel Growing competition over water •70% used for agriculture; 15% - 35% of unsustainable Declining soil fertility & expansion into marginal lands Lack of investment in genetic resource conservation  Increasing urban sprawls Source: Millennium Ecosystem Assessment 2005 Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Outline 1. Concept: Rural / urban “linkages” and “divides” 2. Old and new rural-urban linkages 3. Ways forward Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Actors & factors affecting the nature of urban-rural linkages Global level National level Local level • Trade & •Macro policies • Nature of production agricultural land regulation and •Regulatory policies •Population density liberalization (market, legal) and distribution •Land use •IPR •Decentralization •Roads and transportation •Science •Choice of public •Water management investments •Quality of local government •Access to ICTs •Social networks Joachim von Braun, IFPRI, Washington DC, November, 2006
    • What where? For instance in remote areas Emphasis on small scale agriculture that will fuel the diversification of the rural economy. Investments in: - Roads - Investment in agricultural research and education - Water management - Electricity and telecommunications at local levels - Activation of financial and land markets Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Ways forward 1. Scaling up agriculture innovation together with infrastructure investment 2. Decentralization to better determine and meet local needs 3. Scope for public-private partnerships 4. Filling the knowledge gaps (multi-sector, spatial, and institutional data) Joachim von Braun, IFPRI, Washington DC, November, 2006
    • Rural & urban: great investment potentials in the linkages AGRICULTURE OTHER SECTORS Infrastructure RURAL URBAN Joachim von Braun, IFPRI, Washington DC, November, 2006