The role of agriculture in development remains much debated. This paper takes an empirical perspective and focuses on poverty, as opposed to growth alone. The contribution of a sector to poverty reduction is shown to depend on its own growth performance, its indirect impact on growth in other sectors, the extent to which poor people participate in the sector, and the size of the sector in the overall economy. Bringing together these different effects using cross-country econometric evidence indicates that agriculture is significantly more effective in reducing poverty among the poorest of the poor (as reflected in the $1-day squared poverty gap). It is also up to 3.2 times better at reducing $1-day headcount poverty in low-income and resource rich countries (including those in Sub-Saharan Africa), at least when societies are not fundamentally unequal. However, when it comes to the better off poor (reflected in the $2-day measure), non-agriculture has the edge. These results are driven by the much larger participation of poorer households in growth from agriculture and the lower poverty reducing effect of non-agriculture in the presence of extractive industries.
Education and health care are basic services essential in any effort to combat poverty and are often subsidized with public funds to help achieve that purpose. This paper examines the effectiveness of public social spending on education and health care in several African countries and finds that these programs favor not the poor, but those who are better-off. It concludes that this targeting problem cannot be solved simply by adjusting the subsidy program. The constraints that prevent the poor from taking advantage of these services must also be addressed if the public subsidies are to be effective. Public subsidies for social services such as education and health care rest on two basic policy objectives-efficiency and equity. Efficiency gains can be achieved when the subsidies produce external benefits or correct for a market failure. Equity is also an important objective of public spending. Education and health care, in particular, are understood to be basic services that are essential in any fight against poverty. The World Bank's strategy for poverty reduction, for example, combines broad-based growth with human capital development (World Bank 1990). And for that, public subsidies on investments that enhance human capital must benefit the poor. To what extent has public social spending in Africa been effective in reaching the poor? To answer this question, this article reviews the benefit incidence of government spending. It finds that government subsidies in education and health care are poorly targeted to the poor and indeed favor those who are better-off. Improving targeting to the poor involves not simply rearranging the public subsidies but also addressing the constraints that prevent the poor from accessing these services. The article examines these issues by reviewing the evidence on the benefit incidence of health spending in seven African countries and education funding in nine countries in the region.
The relative contribution of a sector to poverty reduction is shown to depend on its direct and indirect 'growth effects' as well as its 'participation effect'. The paper assesses how these effects compare between agriculture and non-agriculture by reviewing the literature and by analyzing cross-country national accounts and poverty data from household surveys. Special attention is given to Sub-Saharan Africa. While the direct growth effect of agriculture on poverty reduction is likely to be smaller than that of non-agriculture (though not because of inherently inferior productivity growth), the indirect growth effect of agriculture (through its linkages with nonagriculture) appears substantial and at least as large as the reverse feedback effect. The poor participate much more in growth in the agricultural sector, especially in low-income countries, resulting in much larger poverty reduction impact. Together, these findings support the overall premise that enhancing agricultural productivity is the critical entry-point in designing effective poverty reduction strategies, including in Sub-Saharan Africa. Yet, to maximize the poverty reducing effects, the right agricultural technology and investments must be pursued, underscoring the need for much more country specific analysis of the structure and institutional organization of the rural economy in designing poverty reduction strategies.
This article reviews trends in poverty, economic policies, and growth in a sample of African countries during the 1990s, drawing on the better household data now available. Experiences have varied. Some countries have seen sharp drops in income poverty, whereas others have witnessed marked increases. In some countries overall economic growth has been pro-poor and in others not. But the aggregate numbers hide systematic distributional effects. Taking both macro and micro perspectives of growth and poverty in Africa, the article draws four key conclusions. First, economic policy reforms (improving macroeconomic balances and liberalizing markets) appear conducive to reducing poverty. Second, market connectedness is crucial to enable participation in the gains from economic growth. Some regions and households by virtue of their remoteness were left behind when growth picked up. Third, education and access to land emerge as key private endowments to help households benefit from new economic opportunities. Finally, rainfall variations and ill health have profound effects on poverty outcomes, underscoring the significance of social risk management in poverty reduction strategies in Africa. Have episodes of economic growth in Africa benefited the poorer segments of society, or have they left them largely unaffected? To what extent were poor households harmed disproportionately by periods of economic stagnation and recession? How did public policy affect the outcomes? These questions are difficult to answer, given the many real-world changes that affected people's lives in the region. In addition to economic and political reforms, external opportunities and constraints have shifted, with many countries experiencing sharp movements in their terms of trade. Some countries faced internal civil strife and political instability. Others had to endure one of the worst droughts of Luc Christiaensen is Poverty Economist at the World Bank; his e-mail address is lchristiaensen@ worldbank.org. Lionel Demery is a consultant development economist. Stefano Paternostro is Senior Economist at the World Bank. This article synthesizes and builds on the work of a large team of researchers who contributed to a series of country studies under the Poverty Dynamics in Africa project, guided by the authors. It benefits enormously from their careful and competent analysis. The authors are grateful for helpful comments from Alan Gelb, John Hoddinott, Jean Louis Arcand, and the anonymous referees. They especially acknowledge the responsive and enthusiastic research assistance of Angelica Salvi.
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