How Agriculture Supports a Structural Transformation of the Economy

The 2008 food crisis shows the poor are vulnerable to income shocks caused by higher food prices. A new working paper by Jean-Jacques Dethier and Alexandra Effenberger reviews the economic literature on agricultural policy, examining how countries can use agriculture to support a structural transformation of the economy. To reach the Millennium Development Goals, the authors say it’s crucial to improve agricultural productivity in developing countries, where agriculture has a huge capacity to reduce poverty.

In fact, some 75 percent of today’s rural poor would benefit significantly from higher agricultural incomes. Agriculture also has the potential to boost economic growth in Sub-Saharan Africa and other developing economies, which largely depend on this sector. But major increases in productivity would depend on a range of factors, such as new technologies, farm size and access to land. 

The most difficult are institutional challenges related to market failures, missing markets and property rights. Because agriculture links to small cities and rural areas, it can also be an engine of growth and provide employment opportunities for the rural non-farm economy. Government and the private sector alike should play a key role for many of the tasks suggested in this paper. 

Extracted from World Bank