Center for Effective Global Action

The transition from subsistence to commercial agriculture, often referred to as the commercialization of agriculture, has long been considered an important part of the agrarian transformation of low income economies and a means of ensuring food security, enhanced nutrition, and enhanced incomes. However, in the face of imperfect markets and high transaction costs, smallholders are rarely able to exploit all the potential gains from commercialization. With the objective of better understanding smallholder participation in markets, the paper proceeds in Section 1 to examine the impact of early reforms on smallholder market participation. In Section 2, we characterize the dimensions of smallholder agriculture that constrain market participation. In Section 3, a conceptual framework for understanding market participation through the lens of market institutions is proposed, followed by an exposition to recent efforts to promote market development in Section 4 and an overview of participation through the market institution of a commodity exchange in Section 5, before proceeding to conclusions in Section 6.

We ask whether prime-age adult mortality due to HIV/AIDS decreases the endowment of knowledge for agricultural production in Kagera, Tanzania, reducing total factor productivity. We also quantify how much this negative effect contributes to the decrease in long-term household agricultural income growth compared to the contribution of decreased accumulation of productive assets; household members, land, and livestock. We find that prime-age adult mortality decreases the accumulation of knowledge stock as total factor productivity and the contribution of this negative effect to the decrease in agricultural income growth is larger than the contribution of decreased accumulation of each productive asset.

The long-term effects of shocks are examined in the context of a traditional pastoral community. The impacts are empirically examined in connection with the micro-level poverty trap hypothesis and the associated minimum poverty threshold estimates reported in previous studies. We argue that these estimates cannot be taken as definitive and the core explanations behind them are incongruent with the institutional realities of the pastoral community for which they are reported. The reality is that shocks have implied long-term community-wide deprivation with a lasting effect of deterioration in the indigenous capacity to cushion those who slide into permanent destitution. This is evident in the empirically identified increasing loss of confidence in the indigenous social support structures. The findings rather highlight the need for policy interventions to focus on system level community-wide development issues rather than the commonly emphasized individual targeting implied by such exercises as asset-based poverty threshold estimates.

This paper examines the informational origin of the low adoption rates of modern agricultural technologies frequently observed in smallholder agriculture in Sub-Sahran Africa. The paper argues that a large part of these observed low adoption rates can be explained by a simple fact: The lack of awareness of the existence of the technology by a large proportion of the smallholder farming population. The paper analyzes the structure of the adoption gap resulting from this lack of awareness and presents a methodology for estimating that gap and truly informative adoption rates and their determinants. This methodology is then used to provide estimates of the New Rice for Africa (NERICA)

population potential adoption rates and gaps as well as estimates of the determinants of NERICA exposure and adoption in four West African Countries: Cote d’Ivoire, Guinea, Benin and Gambia.

The implied estimated adoption gaps of 21% in Cote-d’Ivoire, 41% in Guinea, 28% in Benin and 47% in Gambia suggest that there is potential for increasing NERICA adoption significantly in these four countries. The results of the analysis of the

determinants of NERICA adoption highlight the importance of Participatory Varietal Selection (PVS) trials and farmer access to extension services in promoting the adoption of NERICAs beyond their beneficial effects in making farmers aware of the existence of the varieties. The findings also points to some possible gender biases in the dissemination of NERICA varieties in Guinea.

The paper reports on a series of field experiments based on a non-standard common-pool resource model and carried out with communal farmers in southern Africa. We frame an experimental design used by Cardenas et al. (2008) in Thailand and Colombia according to the grazing situation in semi-arid regions. We analyse the efficiency of two simple, imperfectly enforced property-rights mechanisms that base on both, informal realworld arrangements practised in the communal areas as well as on the procedure pursued by the Namibian government, where mostly those farmers with big herd sizes get granted access to resettlement farms. Our results suggest that in the short run, the introduction of property rights increases the economic returns and has positive ecological effects, but that these effects diminish in the long-run if imperfectly enforced. It further seems that players’ propensity to co-operate is constant across the experiment: farmers who behave less co-operatively in an open access situation do so as well when they get granted exclusive property rights.

For many poor farmers in developing countries, vulnerability to risk is a dominant feature of their livelihoods. Households' desires to protect themselves against shocks is thought to affect their production and savings decisions. Farmers who are fearful of future loss of earnings may be reluctant to adopt technological innovations with a variable or unknown return. This paper examines the relationship between agricultural development, vulnerability to shocks, and the risk management practices of small farmers in developing countries. It finds that adoption of new agricultural inputs and practices is a combination of both rational and behavioral motives, with peer effects appearing more important through studies of social networks and reinforcement and diffusion effects.

International development agencies have renewed interest over agriculture’s pro-poor potentials. South Africa’s agriculture though contributes less than 3% to GDP, has the highest employment per unit of GDP. The sector is sharply divided into small and large farms. Data reveals an increasing land productivity gap between both types of farms. Using data from various sources1, this paper assesses the agricultural production impacts of inequality and land redistribution, first in the whole agricultural sector, then the sugarcane sub-sector, comparing small-scale and largescale farm performances and considering the causes of the productivity gap. It also analyses the comparative poverty effects of both farm-types. Time series are corrected for unit roots and estimated using robust estimation, which corrects for heteroskedasticity and outliers. Specification tests help to determine the right panel model for sugarcane. The results suggest that inequality (land redistribution) is associated with slower (enhanced) agricultural productivity. This positive effect of land redistribution can be because land constraints in South African large farms may not be binding and therefore the negative impact on large-farms does not dominate. The impact of land redistribution though negative for large-scale and positive for small-scale producers is not significant. This implies that redistribution efforts must be accompanied by significant ease of other constraints facing small farmers. Other inputs like fertiliser and irrigation facilities show more significant impact on small farm production than land alone. Much of the difference in productivity arises from disparity in input use, specifically fertiliser and irrigation. There is possibility of positive external effects from large-scale chemical and labour use to small-scale production as they attenuate the gap in productivities. The finding also suggests the need to strengthen the human capital (particularly education) of small-scale producers. Both large and small-scale sugarcane production have significant poverty reduction effects, but the effect from small-scale production is clearly higher.

The high prevalence of risks in low income economies implies that people’s ability to manage uncertainty is critical for both productivity and their mere survival. This paper analyses seasonal changes in per capita consumption and saving behaviour of farm households in response to health and weather shocks. The notion that people save most of there transitory income, as postulated by the permanent income hypothesis, and precautionary saving motives are tested using a sample of 196 households examined over three consecutive cropping seasons in Central Kenya. The results show that, while people exhibit some level of prudence, the marginal propensity to save out of transitory income is about 33 percent — about a third of what the permanent income hypothesis postulates. This proportion saved is an indication of the extent of incompleteness of credit and insurance markets in the study area. This shows substantial scope for remedial public action in social protection programmes. Seasonality was found to impact on propensity to save with more stressful seasons adversely affecting both savings and consumption. There were differentiated propensities to smooth consumption between the rich and the poor, with the latter group exhibiting stronger precautionary motives. However, the wealth effect becomes insignificant as the seasons worsen pointing to a vulnerable asset base. Unlike weather uncertainty, consumption rise and savings decline in response to health stress associated with HIV/AIDS. The desire to smooth the health (asset) stock seems to outweigh the desire or ability to smooth future consumption through savings. The consequence is more volatile consumption for HIV/AIDS affected households.

This article analyses the determinants of the discrete decision of a household on whether to participate in banana markets using the FIML bivariate probit method. The continuous decision on how much to sell or buy is analyzed by establishing the supply and demand functions while accounting for the selectivity bias.

Results indicate that buying and selling decisions are not statistically independent and the random disturbances in the buying and selling decisions are affected in opposite directions by random shocks. Transaction cost related factors such as geographical location of households, market information sources and travel time to the nearest urban centre do influence participation. Other factors such as labour availability, farming experience, gender of household head, off-farm income and the asset base of the household also affect the likelihood and intensity of participation.

Policies guiding central and local governments towards increased investment in rural infrastructure (i.e. feeder roads networks, trunk roads, telecommunication services and establishment of market places) can help reduce transaction costs and thereby improve participation of smallholder farmers in markets. Policies supporting group formation may lead to improving economies of scale and flow of information amongst farmers which may increase market participation.