2012 us sofa launch "public investment in & for agriculture - what has it acheived &...
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US Launch of The State of Food & Agriculture 2012 at IFPRI "Investing in Agriculture for a Better Future". Presentation by Tewodaj Mogues, IFPRI.TRANSCRIPT
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Public Investment in and for Agriculture:
What Has it Achieved,
and What Determines it?
Tewodaj Mogues
International Food Policy Research Institute (IFPRI)
IFPRI Policy Seminar
Washington DC launch of FAO’s
State of Food and Agriculture 2012:
Investing in Agriculture for a Better Future
22. January 2013
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Determining
factors
Public
Investments in
and for
Agriculture
Outcomes
Outline
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What do we Know about the Impacts
of Public Investments
in and for Agriculture?
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Determining
factors
Public
Investments in
and for
Agriculture
Outcomes
What do we Know about the Impacts of
Public Investments in and for Agriculture?
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What do we Know about the Impacts of Public
Investments in and for Agriculture?
• Study is comprehensive review of academic
literature on this topic
• Based on both IFPRI research and other research
• IFPRI work on public investments in agriculture
pioneered by Shenggen Fan starting late 1990s
and onward; seminal literature by Fan, Peter
Hazell, Xiaobo Zhang (and other co-authors)
• In this presentation, only selected highlights of
the review study discussed
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Returns to Investments across Sectors:
Agricultural Performance
• Ag. R&D
investments
consistently
greatest returns
• Returns to other
ag. investment
(irrigation)
positive but often
surpassed by
non-ag.
investment
returns
Graphical illustration of estimation results from: Fan, Zhang and Zhang (2004); Fan Hazell and
Thorat (2000); Fan, Yu and Jitsuchon (2008); Fan and Zhang (2008)
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Chapters in: Mogues, Benin [eds.] 2012 (book): * Benin, Mogues, Cudjoe
& Randriamamonjy; * Fan & Zhang; * Mogues; * Fan, Nyange & Rao.
Sector Ghana Uganda Ethiopia Tanzania
Agriculture 1 1 3 1
Education 4 2 2 3
Health 3 4 4 n/a
Roads 2 3 1 2
Returns to Investments across Sectors:
Agricultural Performance
Ranking of dollar-for-dollar returns in different types of public
investments (1=highest)
• Diversity across countries in relative returns across sectors
• In some cases, aggregate public spending in agriculture appears
to have low or insignificant impact on incomes and welfare (e.g.
Mogues 2011; Easterly & Rebelo 1993; Milbourne et al. 2003; Mosley et al. 2004)
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Returns to Investments across Sectors:
Poverty Reduction
• No apparent trade-
off between ag.
growth and poverty
reduction, in terms
of contribution of
ag. R&D
• But for poverty,
other types of
investment can be
more important
than R&D (but latter
remains close
second)
Graphical illustration of estimation results from: Fan, Zhang and Zhang (2004); Fan Hazell and
Thorat (2000); Fan, Yu and Jitsuchon (2008); Fan and Zhang (2008)
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0 1 2 3 4 5 6 7 8 9 10
Roads
Edu.
Irr.…
R&D
Irrigatio…
Fertilize…
Power…
Credit…
Returns to Subsidies vs. Investments
across Time
0 1 2 3 4 5 6 7 8 9
Roads
Edu.
Irr. Investm.
R&D
Irrigation subs
Fertilizer subs
Power subs
Credit subs
0 2 4 6 8 10 12 14 16 18 20
Roads
Edu.
Irr. Investm.
R&D
Irrigation subs
Fertilizer subs
Power subs
Credit subs
Graphical illustration of estimation results from Fan, Gulati, Thorat (2008)
1960s-70s 1980s 1990s
• In early stages of green revolution, returns to spending on
subsidies were similar to that of investment in public goods
• In subsequent decades, while overall returns to investments
declined somewhat, they remained very high
• Over time, the marginal contribution to subsidies started to fall
behind returns to public goods spending
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Returns to Investments across
High- and Low-Potential Areas
• Marginal impact on (i) agricultural productivity, and
(ii) poverty reduction
• Examples from: India, China, Uganda
• Effects of public investments are generally higher in
marginal areas than in ‘high-potential’ areas within
the country
• True not only in terms of poverty reduction but also
agricultural performance
Fan, Hazell and Haque (2000); Fan, Zhang and Zhang (2004), Fan and Zhang (2008)
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0
2
4
6
8
10
12
R&D Irr. Roads Edu. Electr. Tel.
CoastalCentralWestern
0
10
20
30
40
50
60
70
80
HYV Roads Canal irr. Electr. Educat.
Irrigated
Rainfed, hi qual.
Rainfed, low qual.
0
10
20
30
40
50
60
HYV Roads Canal irr. Electr. Educat.
0
4
8
12
16
20
24
28
R&D Irr. Roads Edu. Electr. Tel. Pov.
0
2
4
6
8
10
12
14
16
R&D Edu Feeder R. Health
Central
East
West
North
0
40
80
120
160
200
R&D Edu FeederR.
MurramR.
TarmacR.
Health
Agricultural Productivity Poverty Reduction _
INDIA
CHINA
UGANDA
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Returns to Investments across
High- and Low-Potential Areas
• Marginal impact on (i) agricultural productivity, and
(ii) poverty reduction
• Examples from: India, China, Uganda
• Effects of public investments are generally higher in
marginal areas than in ‘high-potential’ areas within
the country
• True not only in terms of poverty reduction but also
agricultural performance
Fan, Hazell and Haque (2000); Fan, Zhang and Zhang (2004), Fan and Zhang (2008)
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What Drives Public Investments
in and for Agriculture?
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Determining
factors
Public
Investments in
and for
Agriculture
Outcomes
What Drives Public Investments
in and for Agriculture?
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Public Investment Decisionmaking and its
Determinants – A Conceptual Framework
Adapted from
Mogues (2012)
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Processes of Budgetary Decisionmaking
• Formal procedures and informal/ de-facto processes
• ‘Garbage-can budgeting’ model: Allocations are
random (Cohen et al. 1972)
• Budgetary model of incrementalism: Inertia and path-
dependency in investment decision-making (Davis 1971;
Cowart et al. 1975; Ostrom 1977, Foelscher 2007a, 2007b)
• Budget implementation (vs. approved budgets)
• E.g. in Nigeria, on average 21 % of agricultural budget never
spent (Mogues et al. 2012)
• Striking results from public expenditure tracking surveys (e.g.
Uganda) (Reinikka & Svensson 2004)
• Sudden revenue short- (or wind)falls; use of funds for other
purposes; leakages/corruption; etc.
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Role of Various Actors in Public
Investment Decision-making
• Policymaker as benevolent and unencumbered social
planner? (Tridimas 2001; Reddick 2002)
• Politicians vs bureaucrats (Niskanen 1971)
• Strength of ‘interest groups’ to lobby for provision of
public investments benefiting them is larger when • ‘Interest groups’ more spatially concentrated dispersed
agricultural households vs. concentrated urban residents (Olson
1985)
• Better access to transport and communications infrastructure
urban vs rural
• Size of group small agricultural population much larger in
many developing countries, reverse in rich countries (Olson 1965)
• Average income and education of group member is higher
low among smallholder agricultural households (Binswanger &
Deininger 1997; Krueger 1996)
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Characteristics of Public Investments
• Attributability of investments to conscious decisions
made by politicians (e.g. visibility, “markability”) (Keefer
& Khemani 2005)
• Temporal features of public investments
• Long lag perturbs attributability
• Lag of investments vs. political cycle
• Time allows for “things to go wrong”
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Policy Considerations
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Policy Considerations:
Impacts of Public Investments
• Compelling evidence on the high social returns to public
investments in agricultural research & technology
• Policymakers should choose judiciously between
different agricultural subsectors and functions (blanket
recommendations to invest more in “agriculture”, vs. in
high-payoff activities within the sector)
• Time-dimensions of public investment effects: • Gains in some investments may materialise only in a longer
time-horizon; take that into consideration when evaluating payoff
• Relative returns do not remain static over time, thus policy
priorities should change as well
• Gains are heterogeneous across space: undertake
spatially differentiated policies/investments
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Policy Considerations:
Determinants of Public Investments
• Is there some value in incrementalism models? Identify
what tends to break inertia and path dependency in
order to be able to use windows of policy opportunities
• Revisit validity of the notion of ‘unencumbered
benevolent social planner’
• Development interventions strengthening cooperatives/
farmers’ unions may have additional benefits beyond
lowering market transactions costs
• Need sharper understanding of how attributability/
visibility/ lag in agricultural public investment affect
resource allocation
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Public Investment in and for Agriculture:
What Has it Achieved,
and What Determines it?
Tewodaj Mogues
International Food Policy Research Institute (IFPRI)
IFPRI Policy Seminar
Washington DC launch of FAO’s
State of Food and Agriculture 2012:
Investing in Agriculture for a Better Future
22. January 2013