developing countries net farm income agricultural value added is estimated to

Developing countries net farm income agricultural

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developing countries, net farm income (agricultural value added) is estimated to have been 5 percent higher in 2004 than it would have been without the reforms since the mid-1980s. And if policies remaining in 2004 were removed, net farm income would rise by another 6 percent (far more than the proportional gain to nonagricultural households). These reforms could further alleviate global inequality and poverty, since three- quarters of the world‘s extreme poor are in farm households in developing countries. One way to look at policy changes over the past 25 years would be to say that developing countries follow the example of higher-income countries in moving from anti to pro-farmer policies as they develop. The Anderson study shows that import-competing farmers in developing countries are being increasingly protected over time.
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13 Agricultural production has been directly supported by subsidies to farm inputs such as fertilizers and irrigation in many developing countries, such as India. Such policies generally benefit more large farmers than smallholders (de Gorter and Swinnen 2002). Bezemer and Headey (2008) argue that public policies that actively support agriculture, such as pricing or support to agricultural research and extension, are a necessary prerequisite for agricultural growth and that agricultural market liberalization has not benefited small farmers due to market failures and distortions. Asia‘s Green Revolution was supported by government interventions sustained for long periods, such as fertilizer subsidies that reduced prices to 25 percent of their world market price. Indonesia‘s rice growth of 5 percent over 1970 – 1988, for example, was mainly been achieved by government pricing, research and investments in the rice sector (Gonzales et al. 1993). But such public large-scale interventions put a heavy burden on government budgets, are not a good use of public funds and are not sustainable over time. They also have other detrimental effects. For instance the subsidization of fertilizer in Asia has led to misuse and soil degradation. Hence, although urban biases seem to be detrimental for agricultural growth by fostering industry, agricultural market interventions such as input subsidies or price support are costly and lead to mismanagement of resources. The liberalization of the market for agricultural outputs, while it does not impose a bias on either sector, can affect the competitiveness of smallholders. The Foundations of Agricultural Growth Having reviewed the role that agriculture can play in economic development, we now look at the performance of the agricultural sector in different regions of the world, the foundations of agricultural growth and the challenges faced by farmers in developing countries today that might diminish the returns to agricultural technologies. These include the structure of agricultural production, environmental factors, and barriers to technology adoption.
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