Effect of Agricultural Transformation on the Working Poverty in Developing Countries

The present analysis has investigated empirically the effect of agricultural transformation on the working poverty rate in developing countries. It argues that agricultural transformation affects the working poverty rate by inducing employment shifts (within the agricultural sector) from the primary agriculture to the agrifood system, and from the agricultural sector to other sectors in the economy. The empirical analysis utilizes a panel dataset of 100 developing countries of which 35 poorest countries, i.e., Least developed countries (LDCs), over the annual period from 2000 to 2021. It uses the error component two-stage least squares to address endogeneity concerns, and accounts for the larger between-country variation of variables than their within-country variations. The findings lend support for the hypothesis that agricultural transformation induces the employment shifts highlighted above, but to a lower extent in LDCs than in NonLDCs among developing countries. However, while agricultural transformation has resulted in a lower working poverty rate in NonLDCs, it has raised the working poverty rate in LDCs. This can suggest that for LDCs, the agricultural sector has not been sufficiently transformed to trigger the requisite employment shifts that would effectively reduce the working poverty rate. Similar findings are obtained for Sub-Saharan African (SSA) countries (41 SSA countries) - the bulk of which being LDCs - versus NonSSA countries in the full sample.