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Figure 1: Total average contribution to poverty
reduction from growth of agricultural, remittance
and non-farm incomes in selected countries
Source: OECD calculations based on data from Povcalnet, 2009 and WDI, 2009
Agriculture also has tremendous potential to alleviate
poverty. A large proportion of the rural population
and labour force in LICs is employed in agriculture.
On average, agriculture’s contribution to raising the
incomes of the poorest is at least 2.5 times higher than
that of non-agriculture sectors in LICs. Underscoring the
relationship between increasing yields and return on
labour with poverty Irz et al. (2001) estimated that for
every 10 per cent increase in farm yields, there was a 7
per cent reduction in poverty in Africa and more than a
5 per cent poverty-reduction effect for Asia. Growth in
manufacturing and services do not show a comparable
impact on poverty reduction. The World Bank (2010)
reported that an increase in overall GDP derived from
agricultural labour productivity was, on average, 2.9
Agriculture
times more effective in raising the incomes of the poorest
quintile in developing countries than an equivalent
increase in GDP derived from non-agricultural labour
productivity. Using cross-country regressions per region,
Hasan and Quibriam (2004) found greater effects from
agricultural growth on poverty (defined as less than US$2
per day per person) reduction in sub-Saharan Africa and
South Asia. (This trend was not seen in East Asia and Latin
America where there were greater poverty-reducing
effects of growth originating in non-agriculture sectors).
Despite the potential contribution of agriculture to
poverty alleviation, mainly owing to the urban bias of
many national government policies (Lipton 1977), rural
sectors in most LICs have not received the levels of public
investment required to support the development of a
thriving agricultural sector. Government expenditure
on agriculture in developing countries dropped from 11
per cent in the 1980s to 5.5 per cent in 2005, with the
same downward trend observed in official development
assistance going to the agricultural sector, which fell
from 13 per cent in the early 1980s to 2.9 per cent in
2005 (UN-DESA Policy Brief 8, October, 2008). In Africa,
governments publicly committed in the Maputo
Declaration of 2000 to spending 10 per cent of their GDP
on agriculture, including rural infrastructure spending
(UNESC ECA 2007). However, only eight countries had
reached the agreed level by 2009 (CAADP 2009).
Between 1980 and 2000, an inverse association was noted
between the size of the agricultural sector relative to GDP
and public spending on agriculture as a percentage of
agricultural GDP as shown in Figure 2, which distinguishes
between agriculture-based, transforming and urbanized
countries. It shows that lower levels of public expenditure
in support of agriculture in the poorest countries have
contributed to their relatively slow rates of poverty
reduction. The data also indicate that while the
Figure 2: Contribution of agriculture to GDP and public expenditure on agriculture as a proportion of
agricultural GDP
Source: World Bank 8
8. Agriculture based=developing-, transforming=new industrialized- and urbanized=developed-countries.
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