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World Bank Document Public Disclosure Authorized UNN-184 j The eL t4 Cu, C Public Disclosure Authorized .asqua1eL Scamcdiz Pt A World Bank Research Publication - Public Disclosure Authorized 3 rt >r ~~~FILE LA)UtY Public Disclosure Authorized 30hns flopkrnS The AgriculturalEconomy of NortheastBrazil A WORLD BANK RESEARCH PUBLICATION The AgriculturalEconomy of NortheastBrazil Gary P. Kutcher and PasqualeL. Scandizzo PUBLISHED FOR THIE WORLD BANK The Johns Hopkins University Press BALTIMORE AND LONDON Copyright (C 1981 by The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. All rights reserved .Manufactured in the United States of America The Johns Hopkins University Press Baltimore, Maryland 21218, U.S.A. The views and interpretations in this book are the authors' and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. The map on p. 20 has been prepared for the convenience of readers of this book; the denominations used and the boundaries shown do not imply, on the part of the World Bank and its affiliates, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries. Library of CongressCataloging in Publication Data Kutcher, Gary P., 1944- The agricultural economy of northeast Brazil. (A World bank research publication) Bibliography: p. 259 Includes index. 1. Agricultural-Economic aspects-Brazil, Northeast. I. Scandizzo, Pasquale L. II. Title. III. Series. HD1872.K87 338.1'0981'3 81-47615 ISBN 0-8018-2581-4 AACR2 Contents Abbreviations xi Preface xiii 1. Introduction and Summary 3 Development, Decline, and Government Intervention 5 The Approach Followed in This Study 19 Summary and Conclusions 21 Appendix: Zonal Delineation of the Northeast 30 2. Labor, Land, and Capital Resources 36 The Agricultural Labor Force 36 Land: Its Distribution and Quality 41 Agricultural Capital 53 3. Outputs, Inputs, and Incomes 58 Agricultural Products 58 Agricultural Output 60 Inputs and Costs 63 Agricultural Incomes 67 Appendix: The National Study of Family Expenditures 73 4. Farm Sizes, Types, and Performance 82 Land and Labor Use 82 Market Dependency: Family and Nonfamily Farms 89 Farm Sizes and Types: A Multiple Classifiication 94 Some Conclusions 97 5. The Structure of the Programming Model 102 An Overview of the Model 104 The Core of the Farm Models 105 Characteristicsof Individual Farm Models 109 Linkages among the Farm Models 116 The Treatment of Demand 118 Appendix A: Aggregationof Farm Types 120 Appendix B: Algebraic Statement of the 1ProgrammingModel 137 Appendix C: Estimation and Testing of Parameters 145 6. Results from the Base Solution 150 Validation Considerations 150 Production and Prices 152 v Vi THE AGRICULTURAL ECONOMY OF NORTHEAST BRAZIL Employment and Labor Utilization 156 Family Reservation Wage 159 Price Elasticities of Demand 160 Optimality Assumptions 162 The Pattern of Constraints 164 7. Policy and Project Options for Northeastern Agriculture 169 The Agricultural Economy Projected to 1978 170 The 1978 Base Case Solution 173 Technical Progress: The Effects of Improvements in Crop Yields 175 The Influence of Risk 177 Employment Policies 179 The Promotion of Demand 183 Development Strategies in the Absence of Agrarian Reform 191 8. The Land Reform Alternative 195 Legislative History 196 The Land Reform Module 197 Potential for Redistribution of the Estate Subsector 198 Performance of the Module Farms 199 Potential Effect of Land Reform 202 Potential Beneficiaries 205 Estimates of Cost 206 Alternative Development Strategies in Conjunction with a Land Reform 208 Conclusions 210 9. The Northeast Problem and the Future of Brazilian Development 212 Miracle Growth and the Rural Northeast 212 Alternative Solutions 213 Potential Role of the Rural Northeast 216 Introduction to the Appendixes 219 Appendix A. Questionnaire Design 220 Design Criteria 220 Field Tests 223 Questionnaire Content 224 Appendix B. Sampling Procedures 228 Selection of Municipios 230 Selection of Farms 233 Supplementary Samples 239 Notes on Sample Expansion 241 CONTENTS vii Appendix C. The Fieldwork 249 Selection and Training of Enumerators 249 Organization and Evaluationof the Fieldwork 251 Appendix D. Data Validation Procedures 253 Bibliography 259 Index 265 Tables 1-1. Principal Characteristicsof the PhysiographicZones 32 2-1. Total and Rural Population and Number EconomicallyActive in Agriculture, by State, 1970 37 2-2. Agricultural Labor Force, by State, 1970 37 2-3. Agricultural Labor Force, by Zone, 1973 40 2-4. Intensity of Agricultural Employment, by Zone 42 2-5. Estimated Size Distribution of Farms, by Zone 43 2-6. Average Size of Sampled Farms, by Farm Size and Zone 44 2-7. Total Area in Farms, by Farm Size and Zone 45 2-8. Distribution of Farms and Farm Area, by Size and Zone 46 2-9. Average Land Values, by Farm Size and Zone 48 2-10. Average Distance from Sampled Farms to Municipio Seat 51 2-11. Tests for Independence between Land Quality and Farm Size, by Zone 52 2-12. Agricultural Capital, by Zone 53 2-13. Average Agricultural Capital per Farm, by Zone 54 2-14. Distribution of Equipment, by Farm Size and Zone 56 2-15. Regression Results: Incremental Capital/Output Ratios (ICOR) 57 2-16. Capital/Output Ratios: Value of Housing, Other Structures, and Equipment 57 3-1. Average Yields of Principal Crops, 1973: Alternative Estimates 62 3-2. Percentage Composition of Agricultural Receipts and Costs, by Zone 64 3-3. Average Expenditure per Farm on Inputs for Livestock, by Farm Size and Zone 66 3-4. Average Expenditure per Farm and per Hectare on Other Purchased Inputs, by Farm Size and Zone 66 3-5. Agricultural Incomes, by Type of Agricultural Agent 68 3-6. Average Permanent Workers' Wages, by Zone 69 3-7. A Low-cost Northeastern Diet 70 Viii THE AGRICULTURAL ECONOMY OF NORTHEAST BRAZIL 3-8. Average Net Income per Farm, by Farm Size and Zone 72 3-9. Average Net Income per Hectare, by Farm Size and Zone 73 3-10. Mapping of Agricultural Households between the sUDENE/WorldBank and ENDEF Surveys 75 3-11. Selected ENDEF Expenditure Data: Current Monetary Expenditure 76 3-12. Selected ENDEF Expenditure Data: Global Expenditure 78 4-1. Gross Output per Hectare, by Farm Size and Zone 83 4-2. Relations between Gross Output per Hectare, Farm Size, Percentage of Farmland under Crops, and Land Quality 84 4-3. Man-years of Labor and Capital per Hectare, by Farm Size and Zone 85 4-4. Trends in Capital and Labor Use as Farm Size Increases, by Zone 86 4-5. Cobb-Douglas Production Functions, by Type of Farm and Zone 94 4-6. Comparison of Marginal Products of Labor with Wage Rates, by Type of Farm and Zone 96 4-7. Comparison of Marginal Products of Labor on Family Farms with the Probability of Finding Alternative Employment 97 4-8. Scalar and Dummy Variable Analysis of Effects on Gross Output of Farm Size, Sharecropping, and Three Types of Equipment 98 5-1. Core Matrix of Farm Models 106 5-2. Family Consumption Tableau 110 5-3. Risk Tableau III 5-4. Livestock ''ableau 113 5-5. Sharecropping Tableau 114 5-6. Man-years of Labor per Hectare, by Farm Size and Zone 124 5-7. Northeast Farm Characteristics, by Farm Type 126 5-8. West: Farm Characteristics, by Farm Type 128 5-9. Middle-North: Farm Characteristics, by Farm Type 129 5-10. Sertao: Farm Characteristics, by Farm Type 130o 5-11. Semihumid Southeast: Farm Characteristics, by Farm Type 131 5-12. Humid East: Farm Characteristics, by Farm Type 132 5-13. Humid Southeast: Farm Characteristics, by Farm Type 133 5-14. Agreste: Farm Characteristics, by Farm l'ype 134 5-15. Northeast: Estimate of Number and Size of Farms, by Type 136 6-1. Model Performance: Crop Production and Prices 152 6-2. Regression Results: Goodness-of-Fit Tests for Production Volumes of Price-Endogenous Crops Simulated by the Model 154 6-3. Persons Occupied in Agriculture: Model Results 156 6-4. Labor Requirements: Model Results 157 6-5. Employment Rates, by Month and Zone: Model Results 158 6-6. Effects on Model Results of Variations in the Family Labor Reservation Wage 160 6-7. Output Generation and Labor Use, by Farm Tvpe: Survev Data and Mlodel Results 163 CONTENTS ix 6-8. Shadow Prices of Land, by Farm Type and Zone: Model Results 165 6-9. Shadow Prices of Tree-crop Stocks, by Zone: Model Results 166 6-10. Domestic Resource Cost Coefficients of Food Crops, 1973 168 7-1. Time Trends in Yields and in Area Harvested, Principal Crops, 1961-63 to 1971-73 172 7-2. Percentage Shifts in Demand for Price-Endogenous Crops, 1973-78 173 7-3. Output, Income, and Employment: 1973 and 1978 Base Cases 174 7-4. Technical Progress Experiment 176 7-5. Alternative Emplovment Policies 180 7-6. Results of Promoting Demand 190 7-7. Alternative Development Strategies in the Absence of Agrarian Reform 192 7-8. Responses of the Estate Subsector to Policy Interventions 194 8-1. Potential Number of Module Farms in the Estate Subsector 199 8-2. Characteristics of Land Reform Modules 200 8-3. Results of a Land Reform in the Estate Subsector 201 8-4. Performance of the Estate Subsector before and after Redistribution 204 8-5. Estimated Partial Costs of Establishing Land Reform Modules 207 8-6. Alternative Development Strategies in Conjunction with a Land Reform 209 B-i. Production Patterns 231 B-2. Selected Municipios, by State 234 B-3. Change in the Optimal Size of Two Samples, as a Function of the Ratio between the Degrees of Variance They Are to Measure 237 B-4. SUDENE/World Bank Survey: Farm Sample Size 238 B-5.
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