Agricultural Productivity Growth and Poverty Reduction: Evidence from Thailand

Raising agricultural productivity in developing countries is often said to reduce poverty, though the empirical evidence is more nuanced. Productivity growth generates additional income and must benefit someone, though not necessarily the poor. It is conceivable that most, or even all of the benefits go to others. Using region-level data from Thailand, we study the relationship between agricultural productivity growth and rural poverty incidence. Our dependent variable is the annual rate of change in rural poverty incidence at the regional level between the years for which poverty data are available. Agricultural productivity is measured as the annual rate of change in regional agricultural productivity, covering the same time intervals as the poverty observations, but lagged one calendar year. Other control variables include regional nonagricultural incomes and the real price of food. The estimated coefficient on the change in agricultural productivity is negative and highly significant, implying that agricultural productivity growth does reduce rural poverty, holding other variables constant. Nevertheless, the poverty-reducing contribution of recent productivity growth is small. The poverty-reducing effects of long-term drivers of agricultural productivity growth are also studied using simulations based on the estimated model.