Beyond Food Production
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Beyond Food Production

The Role of Agriculture in Poverty Reduction

Edited by Fabrizio Bresciani and Alberto Valdés

The importance of agricultural growth to poverty reduction is well known, but the specific channels through which the poor can take advantage of growth require further research. Beyond Food Production takes on this challenge, investigating four important channels: rural labor markets, farm incomes, food prices, and linkages to other economic sectors.
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Chapter 3: Chile

Ramón López and Gustavo Anríquez

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3. 3.1 Chile Ramón López and Gustavo Anríquez INTRODUCTION The objective of this chapter is to quantitatively analyze the role of agriculture in reducing poverty. Following the methodology proposed by López (2002), we consider three channels by which agricultural growth can affect poverty, namely its effects on the real wage of unskilled workers (and/or its possible effect in reducing their unemployment), the direct impact of agricultural growth upon the income of poor farmers and its effect on real food prices. The latter effect is mostly relevant for food items that are not traded. That is, for commodities that due to large transaction costs or to government policies have endogenous domestic prices. We first econometrically estimate the impact of agricultural growth on the real wage of unskilled workers, its employment level, real food prices and income of poor farmers. Next we simulate how such changes impact the income of the poor and how they affect the extent and depth of poverty. We consider a benchmark case based on the current situation and then using the same methodology we simulate how poverty would have changed if agricultural and agro-processing output had been higher than it actually was. Also, we consider how increasing the share of agriculture and agroprocessing in total GDP would affect poverty. The idea is to test the hypothesis that a shift in the composition of national output toward agriculture (keeping total national output constant) is pro-poor and to...

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