Salomón Salcedo, Fernando Soto-Baquero, José Graziano Da Silva, Rodrigo Castañeda Sepúlveda, and Sergio Gómez Echenique
Structural reforms implemented at both the macroeconomic and sector levels beginning in the 1980s played a fundamental role in the formation of Latin America's heterogeneous agricultural sector. Nearly all countries in the region embraced the same reform principles. Typically, these reforms saw unilateral trade liberalization, the elimination of subsidies, the privatization or closure of state-owned firms, the dismantling of research and extension institutions or a significant curtailment of their activities, and the deregulation of markets for agricultural goods and services. This chapter reviews these reforms, the challenges each country has faced in their implementation, and their impacts on the agriculture sectors of Latin American countries, and also considers the role of the state in agriculture and rural development.
Ousmane Badiane and Tsitsi Makombe
This chapter reviews the evolution of development theory and practice, the role of agriculture therein, and the pace of structural transformation in Africa over the last 50 years. The evolution has involved shifting roles of industry versus agriculture and that of government and the public sector versus markets and the private sector. Government intervention in favor of industrialization in the 1960s and 1970s resulted in the neglect of agriculture, poor growth performance, and a productivity-reducing structural transformation, characterized by an increasing concentration of low productivity labor in the informal service sector. The chapter suggests a move away from the dual economy to a three-dimensional model that pays greater attention to the large informal segment of the service sector. A successful transformation will require accelerated agricultural productivity growth, a modernized informal service sector, and effective industrialization strategies, with balanced roles for government, markets, and the private sector, all supported by country-led, evidence-based strategies.
Geraldo B. Martha Jr. and Eliseu Alves
Brazilian agriculture reinvented itself by targeting a science-based approach. Embrapa, the research arm of the Brazilian Ministry of Agriculture, is recognized as key in this process. A set of characteristics—public corporation model; scale of operation at national level; spatial decentralization; specialized research units; strong focus in human capital; a vision of an agriculture based on science and technology—explains Embrapa’s strength and achievements. Looking ahead, agricultural production needs to increase at least at the same pace of demand. Otherwise, prices will increase, and the poor will suffer the greatest impact. One of the greatest barriers to ensure modern technology will be more broadly and effectively adopted is market imperfection, which alters relative prices and the returns to investment in technologies. Reducing market imperfections is a necessary condition for expanding production in a more inclusive way, and to increase the effectiveness of policies targeting technology adoption by farmers.
This chapter reviews the literature on climate-friendly technological change, with a focus on lessons relevant to developing countries. I begin by discussing the sources of environmental innovation. Given that most innovation is concentrated in a few rich countries, this leads to a discussion of the remaining role for lower-income countries, followed by a discussion of technology transfer. Because of the importance of market failures, I then discuss the role of both technology policy and environmental policy for promoting environmentally friendly technological change. The review concludes with a discussion of both the implications for developing countries and suggestions for future research.
José Gregorio Pineda and Francisco Rodríguez
This chapter argues against a natural resource curse not only with respect to GDP growth but most importantly for other dimensions of human development. It shows that changes of human development from 1970 to 2005, proxied by changes in the Human Development Index, are positively and significantly correlated with natural resource abundance. The chapter also takes a close look at the Latin American case. The second section presents a literature review of the effect of natural resources on development: the theoretical arguments, different channels of impact, and why natural resources might not be a curse after all. The third section presents the data and empirical methodology. The fourth section discusses the results, which find natural resources to be positively correlated with human development.
Kamhon Kan and Yong Wang
This article builds on the voluminous India-China literature, which still lacks a theoretical framework to understand India's and China's growth patterns. This article builds a simple theoretical model to understand India's and China's different growth patterns. An interesting stylized fact motivates this exercise: from 1985 to 2004—compared with India—China has had considerably higher rates of physical capital formation; much higher ratios of measured physical to human capital; and a more physical capital friendly public policy. To explain these facts, the article uses a one-sector growth model with two accumulating factors (physical capital [K] and human capital [H]).
Subhashis Gangopadhyay and S. K. Shanthi
This article discusses domestic financial sector reforms in India since 1991. It discusses banking sector reforms at length and argues that although Indian financial markets have increased their efficiency in the postreform phase, India still needs to develop an active and more dynamic bond market and make the bankruptcy market more efficient. This article also discusses the global financial crisis of 2007–2009 and how Indian financial markets behaved during that time. This crisis was especially significant because this was the first time that a liberalized Indian financial market was facing an external shock. The article suggests that the chain of causation during the crisis was more from the real sector to the financial sector rather than the other way round (as in the United States). The article discusses what form financial regulation will take going into the future.
Africa’s environmental capital is an asset for African people. However, Africa’s ecological footprint is increasing and is close to exceeding the continent’s biocapacity. Therefore, shifting to “green growth” is an option to achieve sustainable development, and Africa is well placed to generate benefits from existing environmental capital and latecomer’s advantage. One challenge is how to realize the conversion of environmental capital value into economic value. The valuation of environmental goods and services is a challenge. However, Africa faces the risk of global environmental problems, such as climate change. Even though Africa’s greenhouse gas emissions are limited compared to developed countries and emerging economies, climate change may have a more severe impact. Although the scale and impact of climate change is uncertain, it will lead to the loss of accumulated developmental benefit for Africa. This issue has been long debated, but no best solution has been identified, so further studies are necessary.
Awudu Abdulai and Christian Kuhlgatz
This article reviews the concept of food security and the various approaches developing countries have used to promote food security in their countries. The discussion therefore involves both direct and indirect policy interventions that are used to ensure food security in developing countries. It presents a simple microeconomic model of food security that explains individuals' demand for food ingredients as well as the different channels through which they become food-insecure. It examines the food security policies of developing countries as they relate to the theoretical model. It discusses food market intervention policies and focuses on the indirect food security measures normally employed to attain a sustainable social and economic environment over the long term. This article shows the efforts several policy analysts have put into research to examine policy options and their impacts on food security.
Economic theory often suggests that social institutions are strongly influenced by specific geographic features of regions. The history of gold mining in West Africa, however, suggests that the relationship between mineral resources and social organization is complex and fluid. First, over the centuries gold mining revenues may have encouraged state formation, but at the same time opportunities for conflict and corruption may have undermined state functioning. Second, while gold extraction and trade required social organization, the interpersonal relationships engendered by gold mining also led to new identities and social institutions. These dialectical considerations illustrate how simple theories of how geography affects society need to be tempered by more nuanced understanding of history.
Keijiro Otsuka and Frank Place
Owing to increasing population pressure on limited cultivable land in many parts of sub-Saharan Africa (SSA), farm size has been shrinking, fallow periods have been shortened, and soil fertility has been declining. In accordance with the Boserupian evolutionary theory and the Hayami–Ruttan-induced innovation theory, however, investments in land improvements have taken place, which leads to strengthened individual land rights and the intensification of farming systems in many other parts of SSA. Based on the literature review, this chapter argues that such evolutionary and spontaneous changes should be supported by means of technology development and dissemination, formalization of land rights, and improvement of access to agricultural markets.
Edward B. Barbier
In developing economies, cropland area has continued to expand at the expense of forests, wetlands, and other natural areas. Much of the rural poor—who are growing in number—are concentrated in ecologically fragile and remote areas. The resulting dualistic frontier economy contains a traditional agricultural sector dependent on abundant marginal land and a traded primary products sector that converts scarce natural resources. A model of this economy shows that, as long as there are abundant marginal lands for cultivation, they serve to absorb rural migrants, population increases, and displaced unskilled labor from elsewhere in the economy. Expanding commercial activities that exploit more resources and land will absorb more workers from marginal frontier lands. Although the latter outcome may seem beneficial, it has the tendency to promote boom and bust cycles of economic development.
Ibrahim Ahmed Elbadawi and Nadir Abdellatif Mohammed
African resource-rich developing countries (RRDCs) can avoid the resource curse by strengthening political accountability and effective management of the resource rents. The roadmap for turning Africa’s newly found oil and mineral resource into a “precious boon” for development hinges on three pillars: getting the best deal and prices for the resource; efficiently utilizing the resource by adopting the “right” fiscal institutions; and, equitably distributing the resource to maximize the society’s welfare. Needless to stress that the proposed strategy is premised on the presence of accountable and transparent polity and effective economic governance, though the former might also positively influence political and economic governance.
Ibrahim Ahmed Elbadawi and Nadir Abdellatif Mohammed
Empirical studies and international experiences of resource-rich developing counties (RRDCs) point to a resource bane rather than a boon. Most countries have failed to effectively deploy oil and mineral resource rents to build a broad-based domestic capital base for sustaining growth and economic diversification. In large measure this is because they started with initially weak economic institutions and “bad” political governance with limited checks and balances. Moreover, with natural resource rents flowing in, institutions were further worsened, due to weakening political accountability among other corrosive effects of the resource rents. However, though progress on the governance front is likely to be a daunting task, the recent democratic transitions in Africa hold a lot of promise for the Continent. Moreover, the two global initiatives of EITI and NRC can have substantial positive catalytic roles.
Edmar L. Bacha and Albert Fishlow
This chapter notes that commodity exports were a continuing subject of attention and concern well before the contributions of Raul Prebisch and Hans Singer in the postwar period. Countries will have to design their trade policies in accordance with a changing pattern of comparative advantage. Massive intervention designed to modify that reality runs the risk of repeating past import-substituting industrialization all over again. Argentina has been unable to translate its resource richness into a source of continuous advance over the last 50 years. Chile has achieved impressive gains over the last two decades. Venezuela is the third case. Petroleum has not served to underwrite sustained economic growth. Instead, the cyclical heights and depths have reflected themselves in domestic economic instability. Brazil has managed a remarkable transition over this same period. Import substitution has worked to develop a domestic industrial base of significant magnitude and one capable of international competition.
This chapter examines the role of industrialization, including economic activities such as manufacturing, in Africa’s structural transformation. It begins by providing an overview of the African manufacturing sector and how industries without smokestacks, particularly tradable services and agro-industry, have broadened the range of options for growth-enhancing structural change. It then explains why there is so little industry in Africa and considers the necessary changes in public policy that would accelerate structural change. The chapter also discusses the role of natural resources in promoting structural change and economic growth in Africa before concluding with an evaluation of a strategy for the continent’s industrial development.
Clifford G. Gaddy and Barry W. Ickes
We study the role of resource dependence in Russia. Russia is the world’s leading producer of hydrocarbons and a number of other natural resources. Russia has been dependent on its resource wealth since the time of Peter the Great. The Soviet economic model was characterized by extensive growth, that is, by the accumulation of inputs, most notably natural resources. Today Russia remains highly dependent on its resource wealth. We measure the size of resource rents and document the role of resource abundance for Russia’s growth for the past forty years. We also analyze the political economy of dependence on resource rents. The system by which resource rents are managed has evolved from the early Soviet period through the 1990s to the present. We trace that evolution, describe the nature of the current rent management system, and examine the consequences of that system for Russia’s future economic growth.
Zvi Lerman and David Sedik
This chapter discusses transition policies that led to privatization of land ownership and individualization of agricultural production, with associated changes in farming structure and agricultural productivity. The emergence of land market transactions and administrative constraints to land market development are discussed. Russia has a sharply bimodal agricultural structure, with extreme concentration of land in a few large corporate farms and very little land in small farms. This is symptomatic of a lack of functioning land markets and reflects a policy bias toward large corporate farms. Russian agriculture has advanced far from the Soviet model but still bears a strong resemblance to it. The consequence is largely mediocre productivity performance from the corporate farm sector coupled with remarkable labor-intensive performance from 23 million small household plots. Options for enlarging the individual farm sector to achieve a less bimodal structure and improve the productivity performance of Russian agriculture are discussed.
Arild Moe and Valeriy A. Kryukov
The institutional structure of the natural gas sector evolved from natural conditions and the principles of the centrally planned economy. The industry was transformed to one company in the 1990s while retaining many characteristics of the previous state structure. Gazprom continued to play a vital economic and social role for the government and was granted extensive monopoly privileges. Its low pricing is closely connected to the social and economic role gas has played, but by using gas to subsidize other parts of the economy, the government has left the industry underfinanced for years. There are efforts to raise prices, but the effect of increases is uncertain due to the monopolized sector structure. Comprehensive reform has been proposed but always rejected. Cost increases and the state’s revenue needs are drivers for change. There are increasing contradictions between developments in the resource base and the structure of the industry.
Arild Moe and Valeriy A. Kryukov
This chapter analyzes the development of the Russian oil sector with a particular view to dynamics between resource base, institutions and regulations, and the industry structure as it has evolved since the late Soviet period. The path dependence in the development of the Russian oil sector is evident and constrains further reforms. This concerns the technological structure and fixed assets formed under central planning that still limit the applicability of market mechanisms. Today’s industry structure also has its roots in the organizations of the Soviet oil industry. The ownership pattern and modes of operation of the oil companies were, however, largely formed in the second half of the 1990s, a period characterized by a very weak state and the absence of a resource management policy. The present structure and policies do not match developments in the resource base, something that will constitute an increasing problem in the years ahead.