Poverty and hunger: The number of people now living in extreme poverty has declined by more than half, falling from 1.9 billion in 1990 to 836 million in 2015. Understanding how agricultural and rural development can create jobs and livelihoods for small farmers and the landless, while producing food to reduce hunger and raw materials for the urban economy to reduce poverty.
Agricultural development, can be improved through the following factors, such as technology, supply of inputs, access to markets and the policies and programmes that can stimulate them. Developing countries are moving from being largely rural and agrarian to becoming urban and industrial. However, it is important that the rural non-farm economy can be stimulated to provide local jobs for some of those who leave farming for better paid jobs.

Scale of production is a particular concern. Most farmers in the developing world are smallholders. While in production there may be few economies of scale. Although being small can give advantages in supervision of labor and understanding of disparities in soils and climate, there are disadvantages when dealing with buyers, suppliers of inputs and bankers. Hence, finding ways to link small farmers to link effectively to large-scale enterprises in supply chains is a challenge.

Reducing poverty and producing more food that helps reduce the real cost of food are half the battle in beating hunger and malnutrition. But better nutrition, above all for preschoolers, is also about their health and care. We need to promote basic health care, clean water and sanitation, and girls’ education that make a difference to this side of nutrition.

The view that a productive agriculture is critical for employment creation and poverty reduction is now widely shared within the development community. Yet, this has not always been the case. In the run up to the 2008 world food price crisis, many development practitioners, government officials and economists doubted whether agriculture could still play this role, especially in Africa.

The food price spikes of 2008 brought a realization that more needed to be done to strengthen agriculture in developing countries. Today, world food prices are still 70 percent higher than before the food price crisis (or 40-50 percent in real terms) and the trade and policy environment is much more favorable to agriculture. But African incomes have also grown, poverty has come down and countries are more urbanized.


So, what then is the role of agriculture for poverty reduction today and is the favorable inclination towards agriculture of the past years?

v  Growth in agriculture remains more poverty reducing than growth elsewhere
Growth in agriculture remains in general two to three times more effective at reducing poverty than an equivalent amount of growth generated in other sectors. This holds irrespective of the empirical method or the poverty metric used to estimate this. It is consistent with the findings reported in the literature so far.

v  The poorest benefit most from agricultural growth
The effects on poverty reduction of agriculture are largest for the poorest in society and the advantage of agricultural over non-agricultural growth in reducing poverty ultimately disappears as countries become richer.

Furthermore, the lower the literacy rates, the stronger the progressivity in the poverty-reducing effect of agricultural over non-agricultural growth.

v  The comparative advantage of agriculture is not limited to interior countries
The degree of tradability of the food (and nonfood) that experiences the increase in productivity is an important consideration in determining the reduction of poverty from growth in that sector. It affects the extent to which prices decline and thus the extent to which producers and consumers gain.

Computable general equilibrium model simulations for around 300,000 households from 31 countries suggest that agriculture’s advantage holds, irrespective of whether food is considered tradable or not. Agricultural growth appears a priority for poverty reduction in interior and coastal economies alike.

In conclusion, the advantages of agriculture vs non-agriculture also depend on the financing source. The way public investments are financed has implications which may even overturn the underlying gains from rising productivity.

An increase in public capital formation targeted to agriculture can, for example, negatively affect real consumption wages of the rural unskilled if financed from a tariff, but have a positive effect if financed through a consumption tax, which affects mainly the urban skilled.

Great reliance on aid financed investment on the other hand, may cause real exchange appreciation, favoring the more traditional, domestic oriented non-agricultural sector over the more productive, open modern sector. Financial investment in agriculture would favor growth in the open modern economy and lead to greater labor productivity and hence reduce poverty.

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