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Returns to Investment in Agriculture

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  • Haggblade, Steven

Abstract

Investment in agriculture is necessary for ensuring rapid economic growth and poverty reduction in Zambia, as elsewhere in Africa. Yet many of the key investments required to accelerate agricultural growth – technological research, rural infrastructure and market standards, organization and enforcement -- are public goods. Because the private sector cannot capture gains from these investments, they will not invest in amounts sufficient to ensure broad-based agricultural growth. Therefore, the public sector needs to provide the necessary research, transport and market infrastructure necessary to stimulate agricultural growth. Zambia currently allocates 6% of government outlays for agriculture. This is less that the 10% commitment Zambia has made under the CAADP agreement and far less than the 15% spent by Asian countries at the launch of their Green Revolution. In allocating these funds, Zambia spends the majority of its discretionary agricultural budget on recurrent subsidies for private farm inputs, primarily fertilizer, while spending far less on rural infrastructure and technology development. Yet international evidence suggests that returns to private input subsidies are typically lower than returns to investments in public goods, in part because private input subsidies are prone to rent-seeking and in part because public input subsidies substitute for private financing of these private inputs. Investment in public goods such as agricultural research and extension, rural roads and irrigation typically produce returns two to six times greater than spending devoted to input subsidies. Therefore, a reorientation of public spending, away from private input subsidies and towards increased investment in public goods, would likely accelerate agricultural growth in Zambia.

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Bibliographic Info

Paper provided by Michigan State University, Department of Agricultural, Food, and Resource Economics in its series Food Security Collaborative Policy Briefs with number 54625.

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Date of creation: 2007
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Handle: RePEc:ags:midcpb:54625

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Postal: Justin S. Morrill Hall of Agriculture, 446 West Circle Dr., Rm 202, East Lansing, MI 48824-1039
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Fax: (517) 432-1800
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Web page: http://www.aec.msu.edu/agecon/
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Related research

Keywords: food security; food policy; Zambia; agriculture growth; public investment; Research and Development/Tech Change/Emerging Technologies; Q19;

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References

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  1. Shenggen Fan & Connie Chan-Kang & Keming Qian & K. Krishnaiah, 2005. "National and international agricultural research and rural poverty: the case of rice research in India and China," Agricultural Economics, International Association of Agricultural Economists, vol. 33(s3), pages 369-379, November.
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Cited by:
  1. Chris Funk & Molly Brown, 2009. "Declining global per capita agricultural production and warming oceans threaten food security," The Science, Sociology and Economics of Food Production and Access to Food, Springer, vol. 1(3), pages 271-289, September.

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