Journal of Economics

One reason for the low efficiency of agriculture in developing countries is the low level of agricultural exports. With globalization, a large part of agricultural sector profiling of cultures remains largely non-tradable, for two reasons. First, profiling crops grown within a certain area, such as cassava, yams, sorghum, millet and teff, which do not have sales in foreign markets (although sometimes it sells well in local markets), often dominate the local diet. Secondly, domestic food production remains isolated from world markets because of high transport and trade costs, especially in the rural hinterland, as well as in countries that do not have access to the sea. In Ethiopia, the price of corn, not subject to the mechanisms of international trade may range from about $ 75 per ton (the export parity price) to $ 225 per tonne (import parity price).

The effect of reducing poverty on the development of export agriculture is dependent on participation in the production of small and poor households. Labor-intensive non-traditional exports may also have a significant local effect of reducing poverty by promoting employment, both in Kenya and Senegal, in spite of the tightening food standards and greater vertical market integration, which is usually beneficial to households of average size.

Efficiency in the agricultural sector of developing countries depends on market conditions, as well as the price elasticity of food essentials. Poor households, net buyers of food, benefit from lower food prices up as long as the gain from reducing the cost of food products exceeds the losses from reduced revenue in the form of wages. In contrast, poor producers, net sellers of food, win only if productivity grows faster than prices fall. Given that the demand for leading cultural profiling is usually characterized by lack of elasticity in prices, producers may well be the loser. But even in this case, the increase in the production of staple crops majors usually reduces the overall poverty rate, as not only the urban poor, but more than half of poor rural households are typically net buyers of food. This fact gives insufficient importance.

An illustration may serve as a microeconomic data for Madagascar. While rice is typically export goods in the rural areas of Madagascar, he was non-tradable crop due to high transport costs. Analysis of census data on communities shows that doubling rice crop reduces the proportion of food-insecure in the community by 38% and reduces the hungry period by 1.7 months (or one third). The fall in rice prices and increase in nominal wages of agricultural workers increased real wages, which proved to be particularly favorable for the poorest citizens, who are often net buyers of rice and suppliers of labor. In the winners were and poor net sellers, because productivity growth was more significant than the decline in food prices. In the years 1958-1994. in India, where many members of the rural poor are landless peasants, were econometric studies that showed that the influence of food production on prices and wages were very important for reducing rural poverty in the long run than a direct effect on farm incomes that dominated in the short period.

In addition to macro-channel effects through the price of non-tradable goods and in foreign currency in case of export growth in agricultural production may contribute to the growth in other sectors through communication with consumers and industry. When the income from agricultural production is spent on non-tradable domestic goods and services produced within the country, it stimulates demand for domestic industry and services. Production relations are established with both subsequent links of the marketing chain, stimulating growth in the food industry and in the realization of food products, as well as with the previous link in the chain through increased demand for intermediate inputs m services. Resource availability (the ability to engage in business, excess capacity) and a favorable investment climate, generating a proposal by the non-agricultural sector are of paramount importance for the realization of such bonds.

Agriculture serves as an effective element of growth for the majority of predominantly agrarian countries, since they require the production of most of the food and are likely to maintain a privileged position of agriculture, at least in the medium term. First of all, consider the production of food. In low-income demand parameters are intensified crop production profiling rapid population growth and high income elasticity. By 2015, in Africa the demand for food is expected to reach $ 100 billion, double the 2000 level. Given the fact that production profiling of cultures is mainly of a non-tradable nature, and also because of frequent shortages of foreign exchange for imports of cereals substitutes, food production in the predominantly agricultural countries must keep pace with domestic demand.

Now consider the export. Exports of industrial goods from countries in sub-Saharan Africa has not turned around.As an exception can be called only Mauritius and most recently Kenya and Madagascar, supplying clothing to the conditions of contracts granting trade preferences. In particular, we can mention the law on economic growth and empowerment of African countries. African exports concentrated in primary products, not undergone an industrial process as opposed to industrial exports from Asian countries in transition. Granted, to some extent, these differences are related to ongoing macroeconomic and trade policies, the structure of exports is largely consistent comparative predominant feature of most African countries. Therefore, the strategy for economic growth of countries with predominantly agricultural economy for many years to come should be based on improving agricultural productivity.

What history shows. Higher productivity of the agricultural sector, creating an agricultural surplus, taxed to finance industrial development and help keep food prices at a lower level, served as the foundation for economic growth in the early stages of industrial development in Western Europe, the USA, Japan, and later in Taiwan, China and the Republic of Korea. More close to us time of rapid growth in agricultural productivity in China and India, is widely believed, allowed to initiate industrialization and led to rapid poverty reduction. The most important lesson of this successful experience is that the negative consequences of excessive squeezing of resources from agriculture in each case, counterbalanced by public investment in research in the field of agriculture and rural infrastructure, including irrigation. Sometimes these two processes are followed each other in reverse order.Premature and unnecessarily intensive draining of resources from rural to urban areas in the absence of public investment in agriculture is the main reason for slow pace of development of the agricultural sector in most countries with an agrarian economy. Economic growth and poverty reduction in Ghana in 2000-ies. suggest that the sustained, balanced growth of agriculture today are still really possible. In countries or inland regions with adverse agro-ecological conditions, agriculture’s contribution to economic growth will be limited. Even so, agriculture is still likely to play an important complementary role in reducing poverty and improving food security.Intensification of agriculture will also affect the suspension of the degradation of natural resources, particularly land and forests are the basis for sustainable agricultural growth. A comparison of experience in Indonesia and Nigeria, countries that are major exporters of oil, stimulating the growth of agricultural production can contribute significantly to poverty reduction, even in countries which have rich reserves of minerals.