Economics of Agricultural Development Economics of Agricultural Development examines the causes, severity, and effects of per- sistent poverty, rapid population growth, and malnutrition in developing countries. It discusses potential solutions to these problems, and considers the implications of globalization for agriculture, poverty, and the environment. Areas covered in the book include: • The sustainability of the natural resource environment • Gender roles in relation to agriculture and resource use • The contribution of agricultural technologies • The importance of agricultural and macroeconomic policies as related to development and trade, and the successes and failures of such policies • The implications for what might be done in the future to encourage more rapid agricultural and economic development The globalization of goods, services, and capital for agriculture is fundamental to the future of developing countries and has major implications for the fight against poverty and sustainability of the environment. In recent years, agriculture has once again returned to a position of centre stage as food price volatility has led countries to re-examine their development strategies. This new edition of the essential textbook in the field builds on the 2006 original and reflects the following developments: • The increased impact of climate change • Issues affecting agricultural markets such as bio-fuels, the rise in farm prices, and energy costs • The move to higher valued agricultural products This book will be essential reading for undergraduate students seeking to un- derstand the economics of agricultural development and the world food system, in- cluding environmental and human consequences of agricultural development, inter- national trade and capital flows. This book contains a wealth of real world case studies and is now accompanied by a website that includes powerpoint lectures, a photo bank, and a large set of dis- cussion and exam questions. George W. Norton is Professor of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University, Blacksburg, Virginia, USA. Jeffrey Alwang is Professor of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University, Blacksburg, Virginia, USA. William A. Masters is Professor of Agricultural Economics at Purdue University, West Lafayette, Indiana, USA. Economics of Agricultural Development WORLD FOOD SYSTEMS and RESOURCE USE SECOND EDITION GEORGE W. NORTON JEFFREY ALWANG Virginia Polytechnic Institute and State University WILLIAM A. MASTERS Purdue University First edition published 2006 Second edition 2010 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Avenue, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2010. To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk. © 2006, 2010 George W. Norton, Jeffrey Alwang and William A. Masters All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Norton, George W. Economics of agricultural development / by George W. Norton, Jeffrey Alwang, and William A. Masters. — 2nd ed. p. cm. Includes bibliographical references and index. 1. Agriculture—Economic aspects. I. Alwang, Jeffrey R. II. Masters, William A. III. Title. HD1415.N67 2010 338.1—dc22 2009043168 ISBN 0-203-85275-3 Master e-book ISBN ISBN10: 0-415-49264-5(hbk) ISBN10: 0-415-49424-9(pbk) ISBN10: 0-203-85275-3(ebk) ISBN13: 978-0-415-49264-5(hbk) ISBN13: 978-0-415-49424-3(pbk) ISBN13: 978-0-203-85275-0(ebk) Contents Preface vii Part 1. Dimensions of World Food and Development Problems 1 1 — Introduction 3 2 — Poverty, Hunger, and Malnutrition 25 3 — Economics of Food Demand 47 4 — Population 69 Part 2. Development Theories and the Role of Agriculture 87 5 — Economic Transformation and Growth 89 6 — Development Theory and Growth Strategies 112 Part 3. Agricultural Systems and Resource Use 129 7 — Agriculture in Traditional Societies 131 8 — Agricultural Systems and Their Determinants 146 9 — Resource Use and Sustainability 161 10 — Human Resources, Family Structure, and Gender Roles 185 Part 4. Getting Agriculture Moving 205 11 — Theories and Strategies for Agricultural Development 207 12 — Research, Extension, and Education 227 13 — Land and Labor Markets 260 14 — Input and Credit Markets 281 15 — Pricing Policies and Marketing Systems 301 Part 5. Agricultural Development in an Interdependent World 325 16 — Agriculture and International Trade 327 17 — Trade Policies, Negotiations, and Agreements 349 18 — Macroeconomic Policies and Agricultural Development 365 19 — Capital Flows, Foreign Assistance, and Food Aid 393 20 — Lessons and Perspectives 415 Glossary of Selected Terms 429 Authors Cited 435 Works Cited 439 Subject Index 450 v vi Preface Persistent poverty, rapid population growth, and malnutrition in de- veloping countries are among the most serious issues facing the world today. Economics of Agricultural Development examines the causes, se- verity, and effects of these problems. It identifies potential solutions, and considers the implications of globalization for agriculture, poverty, and the environment. It identifies linkages in the world food system, and stresses how agricultural and economic situations in poor coun- tries affect industrialized nations and vice versa. It focuses on the role that agriculture can play in improving economic and nutritional well- being and how that role might be enhanced. It explores causes and im- plications of agricultural commodity price volatility. Much has been learned about the roles of technology, education, international trade and capital flows, agricultural and macroeconomic policies, and rural infrastructure in stimulating agricultural and eco- nomic development. In some cases, the same factors can contribute to economic growth and lead to price and income instability or environ- mental risk. These lessons and other issues are examined in the book using basic tools of economic analysis. The need is stressed for improved information flows to help guide institutional change in light of social, cultural, and political disruptions that occur in the development pro- cess. The challenge in studying the economics of agricultural develop- ment is to build a broad view of the problem, and to bring economic theory to bear on specific challenges faced by the rural sector and on means for utilizing agricultural surpluses to further overall economic development. The goal of this book is to help students and other inter- ested practitioners gain an understanding of the agricultural develop- ment problem, including the environmental and human consequences of different development paths, and the influence of international trade and capital flows. It is designed to help students develop skills that will enhance their capability to analyze world food and development prob- lems. vii PREFACE This book interprets for undergraduates the economics of devel- opment and trade, including the importance of extending economic theory to account for institutions, imperfect information, and the will- ingness of people to exploit others and to act collectively. This exten- sion provides important insights for development policy and helps ex- plain why some countries develop while others are left behind. The role of the government in promoting broad-based development is ex- plored. The book also covers topics related to sustainability of the envi- ronment, gender roles in relation to agriculture and resource use, and the importance of macroeconomic policies as related to development and trade. This new edition of the book addresses the causes and implica- tions of recent sharp commodity price increases. It contains added dis- cussion of economic issues related to biofuels and climate change and how they affect agriculture in developing countries. INTENDED AUDIENCE Economics of Agricultural Development is designed as a comprehensive text for the first course on the economics of world food issues and agri- cultural development. The book is aimed at undergraduate students, with the only prerequisite a course in introductory economics. Students in undergraduate courses that address world food and agricultural de- velopment represent a wide variety of majors. Economic jargon is kept to a minimum and explained where necessary, and the book sequen- tially builds a base of economic concepts that are used in later chapters to analyze specific development problems. A second audience for the book is those who work for public and private international develop- ment organizations. ORGANIZATION of the BOOK Agricultural development is important for rural welfare and for over- all economic development. Part One of the book considers the many dimensions of the world food – income – population problem in both a human and an economic context. After the severity and dimensions of the problem have been established,