Chapter 9
Agricultural Transformation and
Rural Development
Key Concepts
This chapter emphasizes that a country’s development strategy must include plans for achieving agricultural
progress and rural development, as explained in section 9.1. The major topics addressed in the chapter
include:
How to increase per capita agricultural output and productivity in order to benefit the average rural
dweller and provide a sufficient supply of food for the country.
Role of Government with respect to agriculture and poverty alleviation.
How to transform traditional low productivity agriculture into high productivity commercial agriculture.
Explaining why the decisions of peasant farmers are rational.
The role of risk faced by subsistence farmers and strategies to cope with this risk.
Explaining the role of economic and price incentives in increasing output.
Explaining the exact meaning of rural development.
In section 9.2, progress in the agricultural (cereal yields) sector since 1960 is reviewed and Sub-Saharan
Africa’s continued stagnation features prominently. In many developing countries the agricultural sector often
accounts for a majority of total employment; yet low productivity causes agriculture to represent a much
smaller share of output.
There is a fairly detailed explanation on the structure of Developing World agrarian systems in section 9.3.
Two types of world agriculture are defined: low and high productivity. Agricultural productivity (value
added/worker) and land productivity (average grain yield) is compared for some developed and developing
countries as an illustration of the difference. There is also a new discussion on the categorization of world
agriculture in developing countries into three dynamic categories: agriculture-based countries, transforming
countries and urbanized countries where movement from one category to another is expected. Agricultural
practices in Asia, Africa, and Latin America are compared and contrasted in terms of the structure of their
agricultural sectors and the advantages/disadvantages of each, while acknowledging regional disparities
within regions and countries:
Latin American agriculture is characterized by the dualistic latifundio-minifundio system, in which a
small fraction of landowners own the great majority of cultivated land in the region. Land concentration
is discussed using the Gini coefficient. Total factor productivity is twice as high on family farms as on
latifundios. Latifundios under-utilize labor, while minifundios over-utilize labor, relative to land. The
latifundio system persists partly because land ownership provides such positive externalities as social
status and political power.
Asian agriculture is characterized by too many people crowded onto too little land (land fragmentation).
Farms tend to be small, and production is often characterized by sharecropping and tenant farming.
There is a good discussion of the impact of colonial rule, money lending, and recent population growth.
African agriculture is characterized by low productivity subsistence farming, traditional techniques, a
lack of investment, shifting cultivation, and labor scarcity during the peak agricultural season. Though
traditionally land has been less scarce in Africa, population growth has caused land to become more
scarce, and production has been shifting towards small owner-occupied plots, as opposed to communal
shifting cultivation.
Section 9.4, the section on the role of women, points out that, although women perform a majority of the
work inside and outside of the home in the rural regions, development programs have often targeted men.
In addition, recent research indicates that the contribution of men and women to family income leads to
different expenditure outcomes. Women spend more on children’s health and education compared to men,
which yields larger social returns. Also, reallocating inputs, including training and credit access to women
and their plots has a major impact on the productivity and the incomes of women.
Section 9.5 on the economics of agricultural development, includes an extensive discussion of the transition
from subsistence farming to diversified and partially commercial farming, and to specialized commercial
farming. Key topics include:
Identifying characteristics of subsistence farming. For example, risk aversion may lead poor peasants
to resist new techniques that offer higher average yields because the variance of the yield may be
larger. The relationship between risk aversion and sharecropping is discussed. Interlocking factor
markets and monopoly and monopsony power are mentioned.
Identifying characteristics of the transition to mixed farming.
Identifying characteristics of modern commercial farming. Technology plays a major role at this stage.
An example of the importance of shared learning and technology is given, focusing on pineapple farms
in Ghana.
Section 9.6 covers strategies for a comprehensive program of agricultural and rural development. The
discussion covers the role of technology, pricing policy and other economic incentives, land reform
possibilities, and supportive policies.
The chapter concludes with a case study on women farmers in Kenya has been revised to reflect current
developments.
Lecture Suggestions
A good place to start lecturing on this topic is with a review of the performance of the agricultural sector in
less developed countries over the past 40–50 years. The urban bias of many development policies can also
be reviewed. This is closely connected with an emphasis on why rural sector development is as important
as urban sector development:
The majority of the population often lives in the rural sector, especially the poor.
Industrial jobs (formal sector jobs) are in limited supply.
Demand creation in the rural sector is important.
The rural sector is a source of many development problems discussed in other chapters including
poverty, migration, unemployment, income inequality, and population growth.
The rural sector can be an important source of labor, food, and foreign exchange.
It is important to discuss the structure of production in the agricultural sector of different geographic
regions. This is important in terms of thinking about the most appropriate polices to use for encouraging
development of the rural sector. By way of summary, the pros and cons of alternative agrarian systems can
be explored with a table showing the different structures of production and what the implications are for
some of the important issues:
Production Structure: plantation/latifundio, sharecropping, minifundio, family farms, and
cooperatives.
Issues: technical efficiency, allocative efficiency, financial incentives, economics of uncertainty,
incentives to produce for local needs, distribution, values of modernity, contributions to the modern
sector, and delivery of social services.
Some evidence suggests that successful agrarian systems as diverse as those in South Korea, Taiwan, and
China have been converging toward a hybrid, with family farming and cooperative features.
Farming in South Korea is among the most efficient in the developing world, and its Saemaul Undong
(“new village movement”) rural development program makes for an excellent discussion. (Information
can easily be found online. For example, Edward P. Reed’s “Is Saemul Undong a Model for Devleoping
Countries Today?” The program aims to create a “development climate” through a philosophy of
“diligence, self-help, and cooperation,” by maintaining individual family private ownership of land while
at the same time emphasizing the role of collective action of villagers in developing infrastructure and
raising income and welfare. The efforts to privatize and deregulate the ejidos (commons) sector in Mexico
is also a good and lively discussion topic.
The development of the agricultural sector in the current less developed countries can be compared to the
now developed countries in their earlier stages when productivity in agriculture kept pace with the industrial
revolution, and land reform often occurred. This can be a good lead for a land reform discussion. The external
benefits of being a big landowner often explain why land reform is politically hard to implement. At the
same time, the experience of Brazil shows that the lack of land reform is leading poor farmers to attempt to
occupy land owned by latifundios.
The discussion on low versus high productivity agriculture can be made more technical depending on the
background of the students.
Students with intermediate micro may find interesting a Tobin-Markowitz indifference map diagram to
illustrate the choice of a low-yield variety “Indica rice” over a new high-yield variety “super-rice,”
and an illustration of under-utilization of intermediate inputs and capital on a factor productivity
diagram from an expected utility maximization perspective.
The importance and impact of an increase in the quantity of capital and/or technology can be
reviewed. You may start with the Malthusian model where labor is the only factor and discuss the
subsistence level of living concept. Appropriate technology can also be discussed.
Policy options are numerous and include the provision of public capital infrastructure, research and
development, extension services, input access, transportation, marketing, and storage, and price and
exchange rate policies. Some of these are discussed in the case study of women farmers in Kenya at the
end of the chapter. For example, an overvalued exchange rate can hurt agricultural exports. With respect
to price controls, note that price plays three important roles: crop choice, urban cost of living, and farm
income. Access to information may also be discussed. There may be many opportunities that poor peasant
farmers are not aware of, such as growing high-end organic products for the developed countries.
Additional sources of lecture material are:
Pranab Bardhan. Land Labor and Rural Poverty. Oxford 1984 (for example his chapter on
interlocking factor markets).
Ester Boserup. Population and Technological Change, University of Chicago Press, 1981.
Ester Boserup. The Conditions of Agricultural Growth, George Allen and Unwin Ltd
Ghatak and Ingersent. Agriculture and Economic Development. Johns Hopkins 1984.
Idriss Jazairy, Mohiuddin Alamgir, and Theresa Panuccio. The State of World Rural Poverty: an
Inquiry into its Causes and Consequences. Published for the International Fund for Agricultural
Development. NYU Press 1992.
Michael Lipton. Why Poor People Stay Poor: A Study of Urban Bias in World Development. London:
Maurice Temple Smith 1977.
Gerald M. Meier. Leading Issues in Economic Development. Oxford University Press 1995.
This chapter also lends itself to illustration from current events. Land reform is a very controversial issue.
For details on the experiences of both South Korea and Taiwan you should consult both Wade’s Governing
the Market as well as Powelson and Stock’s The Peasant Betrayed: Agriculture and Land Reform in the
Third World. The MST movement (at http://www.mst.org.br, with links to pages in various languages) is a
good example to illustrate the struggle for land in Brazil. The role of women is another issue that can be
illustrated by reference to current events drawing attention to the unequal work burden in rural areas of
many developing countries.
Discussion Topics: The students should now know enough from earlier chapters to allow for some
interesting discussions. This is a good time to get them to try to integrate the different development
problems into policy options.
Land reform: Present some background information, or have students do independent reading and
research on selected countries before class. Discuss the pros and cons of land reform.
Urban bias and the role of government policy with respect to the agriculture sector.
Policy options: After identifying structural constraints and other data on the agricultural sector’s
performance in many developing countries, see what sort of policy options the students can come
up with.
Sample Questions
Short Answer
1. Explain the concept, goals, and methods of integrated rural development.
Answer: A solid answer will usually be based on the section, “Toward a Strategy of Agricultural and
2. What are the primary determinants of agricultural labor productivity?
Answer: See the section on the economics of agricultural development.
3. Explain the case for land reform in Latin America. Are there any potential negative effects? What
steps could be taken to address these effects?
Answer: The goal would be to increase productivity, and reduce poverty and inequality. Peasants
must be prepared with technical and business skills. Incentives must be offered to keep
4. What are the implications for a successful agricultural development strategy of the finding that
women perform 60 to 90% of all work in the traditional rural areas?
Answer: Agricultural extension programs and access to small scale credit must be focused on
women.
5. In Bangladesh, the government guarantees rice farmers that it will buy rice at a specific price. Explain
the costs and benefits to farmers in good and bad harvest years.
Answer: Supply and demand analysis with reference to elasticities plus a discussion of risk aversion
6. Describe briefly five major characteristics or problems of developing countries’ agricultural sector.
Make reference to specific countries or regions where you can.
Answer: Answers may be expected to vary according to lecture topics, and might include a
7. Explain the role of risk and uncertainty in an analysis of the economic behavior of peasant farmers.
What kinds of questions does this analysis enable us to answer?
Answer: Answers may be expected to vary according to lecture topics, with some discussion of why
8. Critically evaluate the following statement: Government policies to keep the price at which staple
foods are bought and sold low helps to reduce poverty and inequality.
Answer: Students must consider negative effects on rural areas.
9. Is sharecropping economically efficient or inefficient? Explain
Answer: See the section in the text.
10. What are the key characteristics of the agrarian system in Asia that distinguish it from that of Latin
America? Explain your answer.
Answer: Land fragmentation, greater population density and absentee landlords.
11.Women bear a disproportionate burden in the agrarian system of Sub-Saharan Africa, Asia and Latin
America. In addition their productivity is low. Explain these statements with specific examples from
individual developing economies. What measures/policies have been implemented to deal with these
two issues? Once again discuss with specific examples from individual developing economies.
Answer: Discussed in the section on the role of women in agriculture. Specific policies aimed
at raising female agricultural productivity include facilitating access to credit, training
12. What is (are) the key characteristic(s) of the agrarian system in Sub-Saharan Africa?
Answer: Lack of complementary inputs (mechanical power, irrigation, tools, seeds, fertilizer),
shifting cultivation, labor scarcity during the harvesting season while surplus labor during
13. What are some of the specific policies aimed at improving the productivity of women farmers
in Kenya?
Answer: Discussed in the case study to the chapter.
14. What is the Alliance for a Green Revolution in Africa and who are its primary supporters?
Answer: Discussed on Page 443
15. What role should the government play with respect to the agricultural sector in developing countries
in their attempt to alleviate poverty?
Answer: Discussed on Page 446-447
Multiple Choice
1. Crops produced entirely for the market are known as
(a) basic crops.
(b) mixed crops.
(c) hybrid crops.
(d) cash crops.
2. An agrarian system refers to
(a) the pattern of land ownership.
(b) the type of crops grown.
(c) the processing of agricultural commodities.
(d) an economy that has no industry.
3. The primary goal of an agricultural extension service is to
(a) bring new areas under cultivation.
(b) increase the yield per hectare.
(c) introduce land reform.
(d) assist rural-urban migration.
4. Which of the following is an important factor in the success of agrarian land reform policies?
(a) the introduction of sharecropping.
(b) the introduction of tenant farming.
(c) farmer training programs.
(d) the introduction of more capital intensive methods.
5. It is important to place particular stress on the role of women in rural development programs because
(a) women have received less training in the past.
(b) women perform a large majority of the work in the rural sector.
(c) women tend to allocate more resources to their children’s health and education.
(d) all of the above.
6. Sharecropping can be best understood as
(a) a type of agreement preferred by peasants.
(b) a type of agreement preferred by landlords.
(c) a compromise between peasant and landlord preferences.
(d) a type of agreement preferred by neither but given by tradition.
7. A program through which new ideas, methods, and advice are offered to farmers to increase farm
yields is known as
(a) agricultural extension.
(b) agricultural mechanization.
(c) an agrarian system.
(d) land reform.
8. In South Asia and Sub-Saharan Africa, about what share of the labor force works in agriculture?
(a) One tenth.
(b) One third.
(c) One half.
(d) Two thirds.
9. In South Asia and Sub-Saharan Africa, about what share of output is contributed by agriculture?
(a) One tenth.
(b) One fifth.
(c) Two fifths.
(d) One half.
10. In which of these developing regions has food production per capita steadily fallen over the last
quarter century?
(a) Africa.
(b) East Asia.
(c) South Asia.
(d) Latin America.
11.In a world of perfect certainty, sharecropping would be less efficient than a farm owner working his
own farm because
(a) sharecroppers receive only half of their marginal product.
(b) paying a worker a wage gives him or her an incentive to shirk.
(c) sharecroppers are exploited by landlords.
(d) renting farmland concentrates risk on the renters.
(e) all of the above.
12. During the 1990s, food production increased faster than population in all regions of the developing
world except
(a) Latin America.
(b)East Asia.
(c) Sub-Saharan Africa.
(d)none of the above.
13. The African agrarian system is characterized by
(a) absentee landlords.
(b) a dual agrarian system known as latifundio-minifundio.
(c) land fragmentation.
(d) shifting cultivation.
14. The system of land tenure in which tenant farmers pay a fixed share of their crop to landowners is called
(a) communal farming.
(b) collective farming.
(c) latifundio-minifundio system.
(d) sharecropping.
15. Absentee landowners characterize the agrarian system of
(a) Asia.
(b) Latin America.
(c) Sub-Saharan Africa.
(d) all of the above.