Agriculture Reference
In-Depth Information
for local non-farm employment. Based on distance to urban areas we can distinguish
three zones, remote rural areas, rural area in between and peri-urban areas, each with
different likely 'activities' (Table 1).
Note, that these likely activities are not specific for developing countries, but
apply with equal force to high-income countries. The main difference is that in high-
income countries investments in infrastructure have reduced transport costs for most
regions, so that few remote areas remain. Access to urban markets is important for
selling agricultural surpluses and for determining the scope for local manufacturing
and services. High transportation costs prevent sales of all but very high-value crops,
thus, limiting the scope for agricultural activities. At the same time, limited access to
urban markets also implies that goods and services have to be produced locally,
increasing local non-farm employment opportunities if local demand suffices.
The importance of transport costs is also illustrated in Figure 1, presenting a stylized
representation of the development of rural non-farm employment opportunities in
relation to transport costs and agricultural growth. Agricultural and non-agricultural
sectors are linked through production and expenditure linkages 1 . Production linkages
refer to backward (through agricultural inputs) and forward (through processing of
agricultural output) linkages. Expenditure linkages consist of consumption and
investment expenditures. Expenditure linkages work in both directions. Additional
income in agriculture will increase the demand for non-agricultural goods for con-
sumption and investment. Similarly, an increase in non-agricultural income will
increase the demand for agricultural goods for consumption and investment. The
production and expenditure links imply that growth (or lack of growth) from one
sector can spill over to another sector (FAO 2002).
Access to urban markets and links between the agricultural and non-agricultural
sectors determine the different stages of non-farm employment in rural areas. In the
traditional stage, the rural area faces high transportation costs to urban areas. Limited
agricultural productivity limits non-farm employment opportunities. As agriculture
develops, it promotes local non-farm employment through local production and
expenditure links (locally linked stage).
When infrastructure investments reduce transport costs to urban areas, local
goods and services face competition from urban goods and services. This results in a
leakage of positive spill-over effects from agriculture (that may well benefit from
the reduced transportation costs) to urban areas. Although reduced transport costs
may reduce local non-farm employment, it at the same time promotes access to urban
employment through (temporary) migration. Finally, with increasing congestion in
the urban areas there may be a relocation of urban production to rural areas through
sub-contracting of production, using comparative advantages of rural areas such as
1 The discussion on the links between agriculture and non-agricultural sectors originates in
the Green Revolution period. The increases in production needed to be absorbed, drawing
attention to consumption linkages in rural economies (Stokke et al. 1991). One of the first
publications that stresses the growth potential of modern (input-intensive) agriculture and
consumption links is J.W. Mellor's The new economics of growth (Mellor 1976). Most case
studies on the role of these linkages in development are from Asia. The scope for these
linkages in Africa seems more limited (Haggblade et al. 1989).
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