Agricultural Technology, Productivity, and Poverty in Madagascar Bart Minten Chris Barrett February 2006

Presentation Outline 1. Introduction 2. Conceptual framework 3. Data and methodology 4. Descriptive statistics 5. Price and real wage effects 6. How to improve agricultural performance? 7. Simulated impacts of alternative policy interventions 8. Conclusions

1. Introduction Most of the poor (in Madagascar) lives in rural areas Most of the rural poor are employed in agriculture, sometimes as farmers, sometimes as agricultural laborers, sometimes both. All the poor eat. So all are consumers. Many poor producers are actually net buyers. Because the poor are both consumers and (often) producers, sometimes wage laborers, the effects of agricultural technology adoption and productivity improvements on the poor follow multiple pathways. Need to trace out these various pathways.

2. Conceptual framework Three sub-populations: Net food sellers Net food buyers Unskilled workers

2. Conceptual framework Three pathways through which exogenous changes in agricultural productivity affect the poor: Effects on prices. In isolation, price effects of productivity improvements benefit only net food buyers. Effects on incomes through farm profits: if output expands faster than prices fall, net food sellers gain. Effects on real wages through induced change in labor demand and prices: if MRPL increases, employment and wages increase, benefitting unskilled workers.

3. Data and methodology Data sources: Commune census (Cornell/FOFIFA/INSTAT) National household survey, EPM (INSTAT) Population census (INSTAT) 4. Secondary geographic data on climate, soils, altitude (various Malagasy sources) We take communes (N=1392) as unit of analysis and rice as the focal crop. Use regression analysis with Conley correction for spatial autocorrelation and heteroskedasticity and prospective endogeneity of key regressors.

4. Descriptive statistics Net marketable rice surplus and poverty The relationship between household marketable rice surplus and poverty is weak because of occupational choice (rich less likely to be rice farmers).

4. Descriptive statistics Agricultural wage rates (FMG/day) ProvinceFemaleMale Antananarivo Fianarantsoa Toamasina Mahajanga Toliary Antsiranana Total There exists a strong inverse relation between wages and poverty indicators within/between provinces in Madagascar.

Percentage of population who are food insecure 4. Descriptive statistics

Duration of annual soudure 4. Descriptive statistics

5. Price and real wage effects Determinants of poverty/food insecurity Results : Doubling rice yield lowers # food insecure by 38% and shortens lean period by 1.7 months Presence of cash crops reduces poverty indicators Remoteness increases poverty: 1 st -5 th quintile means 10% more food insecure and 0.7 months longer lean season

Rice yields: Yield elasticity of price = 31-45% (18-26%) in harvest (lean) periods Remoteness reduces harvest period prices and raises lean period prices (hurts both net buyers and net sellers) Seasonal harvest concentration reduces prices, especially in lean season (30-50%) Physical insecurity drives prices down, especially in harvest period Cash crop presence drives up rice prices 5. Price and real wage effects Productivity and prices

Rice yields: doubling rice yields, increases real wages 65-89%. Coefficient estimates on prices and wages imply induced labor demand during growing season (difference between OLS and IV estimates) Cash crops: increase real wages Remoteness: negative effect, especially in harvest period 5. Price and real wage effects Productivity and real wages

Increasing rice yields has a strong, positive effect on food security among all the poor: Rice prices fall 18-45%, benefitting net buyers Output increases faster than prices fall, benefitting net sellers (capture 10-60% of productivity gains) Labor demand and real wages increase 65-89%, benefitting unskilled workers. Remoteness hurts everyone (lower harvest period prices for net sellers, higher soudure prices for net buyers, lower real wages) Cash crops: ambiguous results: help unskilled workers and net sellers but hurt net buyers (i.e., small rice farmers) 5. Price and real wage effects Summary

6. How to improve agricultural performance? Rudimentary production systems Very low rates of adoption of chemical fertilizer (6%), organic fertilizer (36%), improved seed (10%), SRI, etc. Given strong positive effect of these agronomic enhancements on rice yields and the positive role rice yields play in advancing food security, key policy question is: How to stimulate greater uptake and increase rice yields?

6. How to improve agricultural performance? Direct and indirect effects on rice yields Strong, positive direct effects on rice yields from fertilizer, improved seed, SRI, improved NRM, agricultural equipment, livestock, and irrigation. Strong, positive indirect effects on rice yields – via induced uptake of agricultural intensification technologies – through irrigation, access to markets, and literacy.

% Communes Estimated changes Rice priceReal wage 1. Increase rice yields 1 ton/hectare100-20%+37% 2. Adopt flood resistant varieties34-9%+11% 3. Adopt drought resistant varieties30-9%+9% 4. Adopt high altitude varieties21-3%+6% 5. Adopt short cycle varieties41-8%+14% 6. Adopt rice flea resistant varieties36-7%+15% 7. Bring all communes to least remote quintile 89+8%+15% 7. Simulated effects of alternative policy interventions

7. Conclusions Adoption of improved agricultural technologies – so as to increase rice yields and demand for unskilled agricultural labor – aids all types of the rural poor and food insecure: 1) Net sellers 2) Net buyers 3) Unskilled workers

7. Conclusions No magic bullet nor striking new approach: Stimulating agricultural productivity improvements – and improving rural market access – are familiar tasks with high payoff in terms of broad-based poverty reduction. Need long-term commitment to rural and agricultural development based on technological change.

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