The impact of research led agricultural productivity growth on poverty reduction in Africa, Asia and Latin America

This paper quantifies the impact of agricultural productivity growth on the incidence of poverty in the least developed countries, measured by the percentage of the population living on less than $1 per day. Using an existing panel of over 120 observations in combination with multiple variables, the authors estimate the poverty impact of agricultural research and development, on which there is no empirical evidence. Adopting a four-equation model that incorporates causal chains allows the inclusion of as many of the relevant variables as is possible.Firstly, using simple regressions the authors show that agricultural productivity growth has a substantial impact on poverty reduction, whereas productivity growth in industry and services does not. Including other explanatory variables in the regressions indicates that inequality increases poverty and that GDP per capita growth reduces it.Investment in agricultural R&D raises agricultural value added sufficiently to give very satisfactory rates of return within the agricultural sector, in both Africa (22%) and Asia (31%), but not in Latin America (-6%). Agricultural productivity growth gives rise to sufficient broad-based growth to pay for the R&D investment needed to generate the technologies required, and there is a substantial effect on poverty reduction. A one percent increase in yields reduces the numbers living in under $1 per day poverty by over six million, with 95% of these in Africa and Asia. The cost of removing one individual from $1 per day poverty in Africa is $144, in Asia $180, or 50 cents per day, but in Latin America it is over $11,000.This study corroborates the World Bank view that growth relieves poverty more effectively. But, the results also show that the sector does matter: the growth needs to be agriculture led, and it is effective only in the poorer countries, and predominantly in the rural areas.