The Role of Agriculture in Poverty Reduction
Edited by Fabrizio Bresciani and Alberto Valdés
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 measure the quantitative...
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