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Agricultural Policies for Poverty Reduction

image of Agricultural Policies for Poverty Reduction

With more than two-thirds of the world’s poor living in rural areas, higher rural incomes are a pre-requisite for sustained poverty reduction and reduced hunger. This volume sets out a strategy for raising rural incomes which emphasises the creation of diversified rural economies with opportunities within and outside agriculture. Agricultural policies need to be integrated within an overall mix of policies and institutional reforms that facilitate, rather than impede, structural change. By investing in public goods, such as infrastructure and agricultural research, and by building effective social safety nets, governments can limit the role of less efficient policies such as price controls and input subsidies.

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The Distributional Implications of Agricultural Policies in Developing Countries

Findings from the Development Policy Evaluation Model (DEVPEM)

This chapter presents the Development Policy Evaluation Model (DEVPEM), a new simulation model which captures four critical aspects of rural economies in developing countries: 1) the role of the household as both a producer and a consumer of food crops; 2) high transaction costs of participating in markets; 3) market linkages among heterogeneous rural producers and consumers; 4) the imperfect convertibility of land from one use to another. The results of simulations for six country models show that no untargeted agricultural policy intervention is pro-poor within the rural economy. While agricultural policy instruments are less efficient at raising rural incomes than direct payments, the degree of inefficiency of some market interventions, notably input subsidies, is not inevitably as high as observed in developed OECD countries.

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