1. Agricultural Development and Economic Transformation: Promoting Growth with Poverty Reduction John W. Mellor
Model to measure impact of rapid agr. growth on:
Speed of economic transformation
Diffusion of Urbanization
Poverty reduction
Compare 6% and 3% agr. growth rates

2. KEY FEATURES THE INSTRUMENT OF MODERNIZATION
The Small Commercial Farmer
Half the households; 3/4s the farm production
Not poor – a problem
THE MECHANISM OF TRANSFORMATION AND POVERTY REDUCTION
Small Commercial Farmer spends half of increments to income on the rural non-farm (poor)sector
The only source of demand for the output of the rural non-farm sector

3. Table 3. 1 Sectorial Employment and Income Growth Rates with a 6
Table 3.1 Sectorial Employment and Income Growth Rates with a 6.0 Percent Rate of Growth of the Agricultural Sector, Ethiopia
Sector
Base Employment %
Growth GDP%
Employment elasticity
Employment Growth %
Incremental Employment %
Small Commercial Farming Households 37 6
0.3
1.8 18
Rural Non-farming Households 43
5.7
0.9
5.1 60
Rural Households, Total 80
5.5
0.6
3.6
78 (64)
Urban Households, Total 20 8
0.5
4.0
22 (36)
TOTAL/AVERAGE
100
6.4 (4.7)
3.7 (2.2)

4. OVERVIEW. Rapid Agricultural growth In Low income country
Dominates poverty reduction
Dominates income growth
Cereals tend to dominate growth
In Middle income country
Important but not dominant for income growth
Fast growth dominated by livestock, horticulture and exports – rarely happens

5. OVERVIEW (Continued) The Economic Transformation
6% growth rate agriculture , low income country
60% employment growth rural non-farm
Twice the share of urban sector
Market town growth large part of urbanization
Rate of employment growth 2/3rds higher than with 3% growth
Relationships comparable for middle income country

6. KEY FEATURES (Continued)
The Engine of Agricultural Growth
Continuous cost reducing innovation
Public Sector research/extension institutions
The Facilitator of agricultural growth
Continual growth in Public Sector rural infrastructure
Continual growth in Public Sector rural education
Why poor performance
The engine/facilitator grossly inadequate
Lack of focused national plan

7. DEPARTURES FROM CONVENTIONAL WISDOM
1. IN LOW INCOME COUNTRIES CEREALS PRICES DO NOT DECLINE WITH RAPID GROWTH:
Large rural poor population with relatively elastic demand for cereals
Demand from prospering Small Commercial Farmers
89% of incremental cereals production consumed in rural areas.
65% by rural non-farm
Rural poor cereal consumption grows at 4.2%
Rapid increase in food security
As demand by poor becomes more inelastic livestock consumption accelerates.

8. DEPARTURES FROM CONVENTIONAL WISDOM (Continued)
2. WITH MODERNIZATIOIN FARMERS WIFE LOSES INLFUENCE
Change in knowledge source from village to external
Institutions need not exclude wives (and female headed households (FHH)
Example:
Organize demonstrations to include wife and FHH
Impact substantial
Poorer farm decisions in many households
Women capabilities not tapped for modern institutions (e.g. coops)
Lower capability in RNF sector

9. DEPARTURES FROM CONVENTIONAL WISDOM (Continued)
3. GROSSLY INADEQUATE EXPENDITURE ON RESEARCH AND INTEGRATION OF EXTENSION
Often one-sixth of reasonable target (DATA)
Greatest comparative advantage of foreign aid
Scarcity of highly trained requires far more support per
Research must lead extension

10. DEPARTURES FROM CONVENTIONAL WISDOM (Continued)
4. RECENT FOREIGN AID HAS ENSURED THAT THE SMALL COMMERCIAL FARMER LACKS ACCESS TO FINANCE!
High income countries have a specialized quasi public institution for SCF
All early starting Asian countries have
African and late Asian countries do not
Foreign aid did not like overdues of Asian countries and killed the golden goose
Cuts modernization by a third

11. DEPARTURES FROM CONVENTIONAL WISDOM (Continued)
5. ESSENTIAL THAT THE PRIME MINISTER BACK A NATIONAL AGRICULTURAL GROWTH PLAN
Modern low and middle income country governments are urban oriented
Need to mobilize support of small commercial farmers
Need support of urban population
Need to motivate government officials

12. THANK YOU!