Agricultural progress is a potent force in reducing poverty in developing countries.
An OECD study finds that rapid and sustainable progress to reduce extreme poverty is next to impossible except where agricultural productivity increases and incomes increase for poor farmers.
Cut global poverty in half by 2015 - this is one of the United Nations' Millennium Development Goals. While a few large developing countries have made exceptional progress in reaching this goal, others will fall far short. Why, then, are some countries doing better than others?
To try to answer this question, OECD looked at the experiences of 25 countries that made the fastest progress in reducing poverty from 1980 to 2005. Of these countries, OECD carried out in-depth case study analysis of Ghana, Indonesia and Vietnam, and also analysed the case of Ethiopia.
The analysis focussed on three key questions:
Was agriculture more important than other sources of income in reducing poverty?
Agriculture dominates non-agricultural activities by its potential to reduce poverty, whether the comparison is within or between countries. More than half of the reduction in poverty achieved in the selected countries during the years under study can be attributed to growth in agricultural incomes.
Remittances account for over a third of the reduction in poverty and are especially important for those in extreme poverty.
Average contribution to poverty reduction in developing countries, by income source
Note: Based on analysis of Brazil, Cameroon, Chile, China, Costa Rica, Dominican Republic, Egypt, Gambia, Ghana, Guatemala, Honduras, Indonesia, Kenya, Malaysia, Mali, Mauritania, Mexico, Nicaragua, Panama, Philippines, Senegal, Tajikistan, Thailand, Tunisia and Vietnam.
Were the countries making rapid progress in reducing poverty similar in other ways?
Per capita incomes grew robustly for all countries in the study
Macroeconomic stability increased for most countries
Primary school completion rates increased in all countries, remarkably so in Ghana, Mali, Nicaragua, Egypt and Tunisia
Scores on the United Nations Human Development Index - an indicator combining scores on per capita income, education and health - were improved
Land reforms took place in some of the countries, most notably in Vietnam
Which government policy actions seem to matter most?
Governments of many of the countries studied here significantly reduced disprotection of agriculture that had been caused by over-valued exchange rates and high taxes on agricultural exports. At the same time, rich country trading partners were substantially reducing their own trade-distorting border protection and subsidies to farmers.
Find out more: Agricultural Progress and Poverty Reduction (pdf, 4 pages, 412 KB)
Agricultural Progress and Poverty Reduction: Synthesis Report
(OECD Food, Agriculture and Fisheries Working Paper No. 49)
This study compares socio-economic characteristics of twenty-five countries that have posted exceptional progress in reducing poverty to better understand why some countries are doing better than others. Three key questions were addressed: 1) Is agriculture more important than other sources of earned income in reducing poverty? 2) Are the countries most successful in reducing poverty similar in other ways? 3) Which government policy actions seem to have contributed most?
With 85% of the population living in the rural areas and depending on agriculture for livelihood, there is no doubt for the economic importance of the agricultural sector for sustainable development and poverty reduction in Ethiopia. A better-performing agricultural sector has provided growth to the overall economy, improved food security and reduced poverty in recent years.
After more than 20 years' steady economic growth and significant poverty reduction, Ghana is aiming to become a middle income country. Agriculture will continue to be a large and important sector in Ghana's economy, according to the economic model featured in this analysis.
Indonesia's achievements in reducing poverty were substantial in the period leading up to the Asian financial crisis of the late 1990s, which slowed down the pace of poverty reduction. Agricultural growth performance in Indonesia has been weak, with a decline in real spending on agricultural research.
Vietnam's economic recovery since the late 1980s has lifted nearly half the population from below to above the international dollar-a-day poverty line. The country which could not produce enough rice to feed its own population in those years is now a major supplier to world markets. Agricultural policy reforms were a major factor in this recovery, this study finds.
This project was financed by a grant from the Government of the Netherlands.
Agricultural Policies for Poverty Reduction
With more than two-thirds of the world’s poor living in rural areas, higher rural incomes are a prerequisite for sustained poverty reduction and reduced hunger.
This book sets out a strategy for raising rural incomes which emphasises the creation of diversified rural economies with opportunities within and outside agriculture. It proposes a three-pronged approach to strengthening rural incomes and reducing poverty:
- Improve productivity and competitiveness in the agricultural sector
- Help households diversify their sources of income
- Facilitate the movement of labour from the agricultural sector to better-paid non-farm jobs