• Rural Digital Europe
• Publications close
• Preprint close
• Research Papers in Economics close

The primary objective of this report is to review the trends in public investment in Water for Agriculture Production (WfAP) at the national and subnational levels. Specifically, this report aims to i) review the national and sub-national literature on investment in WfAP with specific reference to smallholder agriculture; ii) review the extent to which budget preparation and development processes enable the consideration of the wider social-economic and growth impacts of investing in WfAP; iii) identify, map and quantify resources that are allocated for WfAP in the national budget; and iv) track and assess the extent to which the appropriated budget translates into allocations and transfers to local governments for the implementation of WfAP for the benefit of smallholder farmers.

We present a new multi‐sector growth model that features nonhomothetic, constant elasticity of substitution preferences, and accommodates long‐run demand and supply drivers of structural change for an arbitrary number of sectors. The model is consistent with the decline in agriculture, the hump‐shaped evolution of manufacturing, and the rise of services over time. We estimate the demand system derived from the model using household‐level data from the United States and India, as well as historical aggregate‐level panel data for 39 countries during the postwar period. The estimated model parsimoniously accounts for the broad patterns of sectoral reallocation observed among rich, miracle, and developing economies. Our estimates support the presence of strong nonhomotheticity across time, income levels, and countries. We find that income effects account for the bulk of the within‐country evolution of sectoral reallocation.

We assess the effects of a major land policy change on farm size and agricultural productivity, using a quantitative model and micro-level data. In particular, we study the 1988 land reform in the Philippines, which was an extensive land redistribution program that imposed a ceiling of 5 hectares on all land holdings while at the same time severely restricting the transferability of the redistributed farm lands. We combine two sources of micro data to study the size and productivity effects of the land reform: (a) Decennial Agricultural Census Data, which offer a complete enumeration of farms, outputs, and inputs at the farm level in two separate cross sections, before and after the reform; (b) Philippines Cash Cropping Project, a panel of farm survey data, which tracks a much more limited number of rural households before and after the reform but offers a wealth of information at the parcel and farm level. We decompose the change in aggregate agricultural productivity, before and after the reform, into: (a) a reallocation effect, whereby farming activity is shifted from large farms to small farms and (b) a within-farm effect. The panel of farm surveys allows us to track a particular farmer over time and therefore to observe the source of the within-farm effect following the reform, such as a change in the crop mix or input mix. By focusing on a given country and tracking farmers over time, we control for farmer ability and for location since land quality and climate are constant. We develop a quantitative model with a non-degenerate distribution of farm sizes that features an occupational-choice decision for the farmer. The farmer chooses between two technologies: a ``cash crop'' and a ``food crop'' technology. The cash crop technology requires larger plots to be profitable, while the food crop technology can be operated at any scale. A land reform reduces aggregate agricultural productivity not only by reallocating resources from large/high productivity farms to small/low productivity farms, but also by altering the technology choice of farmers away from the more productive technology. We calibrate the model to the agricultural sector of the Philippines before the reform. We discipline the parameters of the technology choice from the farm-survey data on farm-cropping patterns. We then impose the land reform policy limiting farm size to 5 hectares and we study the consequences of this policy for average farm size, aggregate agricultural productivity, and the distribution of farm-level productivities. Contrary to the many empirical studies of land reforms that find inconclusive evidence of the policy on productivity, our preliminary results indicate that the land reform had a substantial negative impact on farm size and agricultural productivity.

As in the case of agricultural cooperatives, collective fields in extended agricultural households act as an insurance device, by redistributing income between household members. At the same time they entail inefficiencies arising from the incentives to free ride on co-workers efforts. Privatization solves the latter problem but comes at a cost of lower risk-sharing (Carter, 1987). The classic analysis of the trade-off between efficiency and risk-sharing rules out another major risk-sharing mechanism, namely voluntary interpersonal transfers. This paper is a first attempt to merge the two insurance mechanisms: collective production, which is plagued by free riding and income transfers, which are hampered by limited commitment. Privatization of land is shown to interact with incentives to abide by the insurance agreement, so that the tradeoff between risk-sharing and production efficiency may or may not be maintained with income transfers. We show that an increase in the value of the household members’ exit option or a decrease in patience decreases the optimal rate of privatization. With the help of numerical simulations we argue that households of greater size are also more likely to privatize land.

Abstract Uninsured risk constrains households in their production decisions in many developing countries. Similarly to crop insurance, employment guarantees can support farmers in managing agricultural production risks. Evidence from representative panel data of Andhra Pradesh, India, suggests that the National Rural Employment Guarantee Scheme (NREGS) reduces households’ uncertainty about future income streams because it provides employment opportunities in rural areas independently of weather shocks and crop failure. Therewith the NREGS makes an ex-post labor supply response to agricultural shocks more efficient. Households with access to the NREGS are found to shift their production toward riskier but also more profitable crops. The observed shifts in agricultural production do considerably raise the profitability of agricultural production and hence the incomes of smallholder farmers. The findings are not driven by changes in the labor or cost intensity of those crops, which supports the idea that the causal mechanism underlying the observed changes is indeed an insurance effect.

This paper quantifies the aggregate impact of communal land tenure ar- rangements that prevail in Sub-Saharan Africa. Such tenure regimes limit land transfer- ability by prohibiting sales, subjecting rented-out land to the risk of expropriation, and redistributing it to existing farmers in a progressive fashion. We use a general equilibrium two-sector selection model featuring agents heterogeneous in skills to compute the result- ing occupational and operational choices as well as land allocations. The quantification of the model is based on policies deduced from Ethiopia. In the Sub-Saharan African context we find that such policies substantially dampen nominal agricultural relative to non-agricultural productivity, by 25%. Real relative agricultural productivity, however, only falls by 4% since cross-sectoral terms of trade adjust strongly, with excess agricul- tural employment only amounting to some 1.5 percentage points. The loss in GDP is small, about 2%. That serves as a reminder that ostensibly highly distortionary policies need not have substantial bite when individuals strategically adjust to them and equilib- rium prices adapt. For example, the model predicts that at given prices 62% of farmers in an economy such as Ethiopia would leave farming if tenure were secured, casting land insecurity as a major obstacle. Yet only 9% would actually switch sectors after price adjustments are factored in.

This article analyzes the trade-off between yield and farmed area when a valuable species is affected by agricultural practices. Itrevisits, from an economic perspective, the ``land-sparing versus land-sharing'' debate elaborated in conservation biology using themethodology of the density-yield curve: The density of the species on farmland is a decreasing function of the yield. It is shown thatthe optimal yield is either increasing or decreasing with respect to the value of the species depending on the shape of the density-yieldcurve. Land-sparing and land-sharing are not necessarily antagonistic; for sufficiently elastic demand function, both the optimal yield andthe farmed area decrease with the value of the species. A général assessment of a second-best policy is performed, and several particularpolicies are considered, including a subsidy on biodiversity in farms, a tax or subsidy on farmland, and a tax or subsidy on a dirty input.In several cases, the first-best strategy and the second-best one induce contrasting effects on the yield.