agriculture and the rural-urban transformation in ethiopia:summary findings and implications for...

ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

Agriculture and the Rural-Urban Transformation in Ethiopia:

Summary Findings and Implications for Development Strategy

Paul Dorosh and Emily SchmidtESSP – II ConferenceOctober 22-24, 2009

1

Production and Real Prices of Major Cereals in Ethiopia, 2000/01 to 2008/09

Source: Dorosh and Ahmed (2009). 2

Agenda – Day 1Thursday, October 22, 2009

Session I: Enhancing Agricultural Productivity

Trends and Determinants of Agricultural Productivity (Alemayehu Seyoum Taffesse and others)

Public Expenditures on Agriculture (Alemayehu Geda)

Session 2: Rural Service Delivery and Weather Insurance

Agricultural Extension and Rural Water Supply (Tewodaj Mogues and team)

Weather Insurance for Farmers (Ruth Vargas Hill)

3

Increasing Cereal Productivity (1)

– Sample means from the CSA Agric Sample Survey data

• Only about half of farmers use fertilizer (teff, wheat and maize)

• Farmers using both seed and fertilizer have moderately higher yields (this does not correct for agro-ecology, other inputs and many other factors)

– Regression analysis of CSA Agric Sample Survey data

• Average and marginal productivities are positive but relatively low

• Using the regression coefficients, recent growth in teff and maize yields is not explained by fertilizer increase or other factors included in the regressions

4


– ERHS yield trends (rainfall sufficient highland cereal-based AEZ)• Wheat: yield levels and (positive) trend is similar to Ag

Sample Survey in this ecology• Maize and teff: much lower yields and opposite trend as

compared to Ag Sample Survey data in the ecology

– Methodology and data• National CSA Agric Sample Survey data: yields have actually

increased• Regression analysis: Taking into account fertilizer and other

factors, the increase in yields in the CSA data is still not explained

• Agronomists: Need to take into account other factors: fertilizer is highly productive under the right conditions

5


– Fertilizer use is important but does not appear to induce significant growth

• Need to explore how fertilizer works

– Fertilizer combined with improved seed is needed to push yields higher

• Improved seeds is binding constraint

– Extension services and credit availability have positive and significant impact on yields

• How these effects are generated need to be established

6


– Should we be optimistic or pessimistic about increasing cereal yields?

• John Hoddinott’s musical conclusion: It’s a package deal (seed, fertilizer, extension)

• Please stay for the debate this afternoon!

7

Efficiency of Public Sector Spending on Agriculture

– The top priority: CAPACITY STRENGTHENING

• to assess returns on proposed projects and

• to better link micro-level planning to the macro-economic and sectoral planning

8

Rural Public Service Delivery• Access to safe drinking water sources is very low

– 32% of study households—which is substantially higher than nation-wide rural access of 11% (2004, WDI 2008)

– Weak accountability links may be a hindrance in translating rural residents priority concerns into policy priorities

• Water committees, the lowest level service providers, are still insufficiently inclusive

Take measures to make committees inclusive – or consider alternatives (Making it a responsibility of councils?)

• Water committees not able to counter-act top-down facility provision.

Draw on local knowledge and local considerations in selecting sites –more discretion.

• Water committees have high discretion in setting rules, fees, etc., but unable to effectively use this discretion due to nearly no training on “soft skills”

Train water committees on community relations

9

Rural Public Service Delivery (2)• Evaluating agricultural extension services

– Challenges in measuring farmers’ satisfaction

• High satisfaction rates in spite of low adoption rates

• Need for further methodology development, especially if satisfaction data are to be used for management purposes

• Strategies to better target female farmers

– Linking extension with women’s groups

– Increasing female staff among extension agents

10

Experimental Evidence on Potential Effects of Weather Index – Based Insurance

– Methodology: Structure game on weather-index based insurance with farmers in SNNPR

– Results suggest that providing insurance would increase farmer investments in agricultural inputs (e.g. fertilizer)

– Discussant: Credit is a major constraint on farmer use of fertilizer (and potential use of insurance)

11

Agenda – Day 2Friday, October 23, 2009

Session 3: Household Food Security

Food Consumption Patterns and their Determinants (Zeleka Paulos and Kibrom Taferre)

Trends in Household Food Security in Ethiopia (Emily Schmidt)

Panel Discussion

Implications of Price Shocks on Household Food Security (S. Robinson, Dirk Willenbockel, HashidAhmed, Paul Dorosh)

12

Analysis of Food Consumption Behavior from HICES 2004/05 Data

– Large variation in consumption patterns by urban/rural and ecology; also by per capita expenditure level

– Own-price elasticities of food are generally high: households are price responsive: change quantities consumed in response to price changes

– Analysis of impacts of the effects of price increases must include these quantity adjustments to be accurate

13

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM

Ethiopia Food Security Index: 2000 and 2005Although considerable improvement occurred across all regions, all regions remain within the serious or very serious category:

• Addis Ababa and Harari remain the top performers in the ERHI ranking and have progressed out of the very serious category.

• SNNPR dramatically improved its score from 2000 to 2005, and is currently 4th in the ERHI ranking.

Results: Food Security Index 2000 - 2005

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Ethiopia Regional Food Security Index

– There has been substantial improvement in the index across all regions between 2000 and 2005

– When new nationally representative data are available (2010?), analysts can determine the extent to which these positive trends have continued

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CGE Analysis of Production Shocks

– For each commodity, a region’s share of national commodity production and the share of value added from that commodity in household income largely determine the magnitude of effects on national prices, incomes and consumption

– Regional production shocks have limited effects on national markets; thus, local level monitoring is crucial for identifying and responding to sub-national production shocks

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Real Wholesale Prices of Cereals (Addis)2004-09

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Maize Mixed Teff Wheat Sorghum

Source: Dorosh and Ahmed (2009). 17

Food Security and the ERHS Data

• Interventions to enhance food security– Examples of successful micro-level interventions in

irrigation exist

– PSNP interventions have succeeded in providing a consumption floor; when combined with OFSP, there are significant increases in incomes, as well

• Initial findings from the 2009 ERHS data– Substantial improvements in households’ perceived

welfare, various household assets, child education (both boys and girls)

– Further analysis coming soon!18

ERHS: Self-Reported Perceptions of Poverty

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Agenda – Day 2Friday, October 23, 2009 (cont.)

Session 4: Agriculture and Beyond: Macro- and Micro- Analysis

Household Income and Welfare Dynamics: Evidence from the ERHS Surveys (John Hoddinott)

Constraints on the Rural Non-farm Economy: An Analysis of the Hand Loom Sector (Gezahegn Ayele and Lisa Moorman)

Real Exchange Rates, Growth and Income Distribution (Paul Dorosh, Sherman Robinson and Hashim Ahmed)

20

Increasing Productivity of the Rural Non-farm Sector (Hand-Looms)

– Greater infrastructure is associated with more complex marketing networks and greater marketing linkages between rural and urban markets

– Electricity enables longer working hours

– Controlling for other factors, access to electricity (and other associated infrastructure) raises productivity of rural hand-loom enterprises by 55 percent relative to those without electricity

21

Implications of Foreign Exchange Rationing

– Foreign exchange rationing results in an appreciation of the real exchange rate (in comparison to a policy of no rationing)

– The major beneficiaries of this policy are those who receive economic rents generated from rationing

– Incomes of net producers of tradable goods (including many farmers) are reduced

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Spatial Aspects of

Development Strategy

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• Ethiopia has placed a primary emphasis on rural and agricultural led development; nonetheless, the country continues to urbanize.

• Improved transport within Ethiopia has facilitated greater mobility of capital, goods, and people, and incentivized population clustering along major transportation routes

• Larger cities have emerged over the 3 census years, especially in Oromia, Amhara and SNNP regions. These cities represent large potential markets for agricultural products.

• Barriers to increased production and farm incomes include:

– Small size of land holdings

– Dependence on rainfed agriculture / limited irrigation

– Remoteness: limited access to market centers


The Rural / Urban Landscape in Ethiopia

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Euclidean Distance (straight line distance) or distance in kilometers may not take into account specific localized biophysical factors

– In order to measure travel time to a major city:

Estimation of Travel Times – A series of GIS layers are merged into a ‘friction layer’ which

represents the time required to cross each pixel– Road type and class

» Paved – all weather» Paved – dry weather» Gravel – all weather» Gravel – dry weather» Earth

– Waterbodies– Landcover– Slope

Travel Time and Agglomeration Index (urbanization)

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM25

Travel time 1984


Travel time 1994


Travel time 2007


Percent population connected to a city of at least 50,000 people in 1994

Region Access < 1 hour

Access 1-3 hours

Access 3 - 5 hours

Access 5 - 10 hours

Access > 10 hours

Tigray 3.7 3.4 16.2 47.7 29.0

Afar - - - 5.6 94.4

Amhara 2.8 8.0 18.1 44.5 26.6

Oromia 5.3 7.7 20.6 36.7 29.8

Somali 8.0 - - 11.0 81.1

Benishangul-Gumuz - - - 11.2 88.8

SNNP 3.4 7.3 26.9 39.6 22.9

Gambella - - - - 100

Harari 100 - - - -

Addis Ababa 100 - - - -

Dire Dawa 100 - - - -

Ethiopia 8.4 6.4 18.2 36.0 31.0

Results

• In 1994, all of the inhabitants in Gambella region were more than 10 hours travel time to a city of at least 50,000 people

• Overall, 31% of the population in Ethiopia was more than 10 hours away from a major city

• In the four main regions, more than 50% of the population was over 5 hours travel time from a city29

Travel Time: Percent point change in access to a city from 1994 to 2007

Region Access < 1 hour Access 1 - 3 hours

Access 3 - 5 hours

Access 5 -10 hours

Access > 10 hours

Tigray 7.13 12.01 (3.72) 5.98 (21.39)

Afar - - - 4.11 (5.89)

Amhara 2.23 14.68 18.94 (12.49) (23.35)

Oromia 3.74 10.40 15.84 (8.88) (21.10)

Somali - - - 2.62 (2.61)

Benishangul-Gumuz - - - 17.91 (17.91)

SNNP 9.17 45.37 (14.59) (21.56) (18.39)

Gambella - - - - -

Harari - - - - -

Addis Ababa - - - - -

Dire Dawa - - - - -

Ethiopia 4.10 17.12 7.54 (9.93) (18.83)

Results

• Population over 10 hours in the main four regions improved by at least 18%

• Only 2.6 percent of the population in Somali region decreased travel time to under 10 hours over the 13 year period.

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• In order to standardize urbanization measurements, we use methodology developed by Uchida and Nelson (2009):

• Urban areas are identified spatially using specific thresholds:

– A population density greater than 150 people per km2;

– Populations located within 1 hour travel time to a city of at least 50,000 people.

– City centers of at least 50,000 people

Agglomeration Index: measuring urban expansion


Agglomeration Index 1984Urban Expansion

In 1984, Addis Ababa and other larger cities were primarily confined to its city administrative boundaries.

There were only a few cities with greater than 50,000 people

Limited road networks and more dispersed population characterized the demographic landscape.

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Agglomeration Index 1994

By 1994, Ethiopia’s cities grew, and the country’s transportation network expanded

Urban corridors formed between Addis Ababa and Nazaret

Shashamene and Awasa also formed an urban network between Oromia and SNNP regions.

Jimma urbanization is also expanding along key road networks

Urban Expansion

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Agglomeration Index 2007

By 2007, urban linkages were clearly visible throughout Oromia, SNNP, and Amhara regions.

Addis Ababa expanded to connect Sebeta and Bishoftu, and Asela in the South.

Addis Ababa also connected to Ambo in the west, and Debre Berhan in the east

Jimma had grown into a southwestern hub with opportunities to link with Nekemte to the north.

Urban Expansion

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Limited urbanization (2.2%) is present in SNNP region in 1994

Population Density and Urbanization: 1994

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City growth, as well as more networked infrastructure increased urbanization rates in SNNP almost 20%

Population Density and Urbanization: 2007

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Population Density follows road infrastructure

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Average Cropped Area per Holder

• The national average cropped area is 0.8 hectares

• Average cropped land holdings are low throughout the country

• This is especially true throughout the southwest

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• Fertilizer use on cereals is mostly limited to the highlands and clustered in specific areas

• This may be related to the proximity of major urban centers and associated fertilizer costs or distribution systems.

• Moving from the highlands, fertilizer use becomes notably less prevalent.

Average % of cereal crop area with inorganic fertilizer

Percent Fertilized Area: EASE 2001/02

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Topography within Ethiopia is varied and fragmented within and among regions.

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Rainfall is highest and least variable in the western part of the country and the western slopes of mountains

Annual rainfall varies across space

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Agro-ecological Zones (AEZ’s): “3 Ethiopias” split into 5 AEZs

Source: 2005/06 EDRI Social Accounting Matrix. 42

Agricultural Value Added by Agro-Ecological Zone

Zone 2: Rainfall sufficient highlands (cereal – based)Zone 3: Rainfall sufficient highlands (enset – based) – most of SNNPRZone 4: Drought proneSource: 2005/06 EDRI Social Accounting Matrix.

bn birr (2005/06) Shares

Zone 2 Zone 3 Zone 4 Zone 2 Zone 3 Zone 4

Teff 2.75 0.29 1.41 10.8% 3.7% 9.3%

Wheat 2.31 0.26 0.88 9.1% 3.2% 5.8%

Maize 2.71 0.75 1.09 10.7% 9.4% 7.2%

Bar/Sor 2.47 0.20 1.61 9.7% 2.6% 10.6%

Enset 0.25 0.66 0.44 1.0% 8.2% 2.9%

Exp Crops 3.78 2.01 3.08 14.9% 25.1% 20.3%

Oth Agric 3.64 2.09 2.35 14.3% 26.2% 15.5%

Livestock 7.47 1.72 4.34 29.4% 21.6% 28.6%

Total 25.38 7.97 15.19 100.0% 100.0% 100.0%

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• Ethiopia has placed a primary emphasis on rural and agricultural led development; nonetheless, the country continues to urbanize and agglomeration economies are beginning to link and form corridors of economic growth.

• Improved transport within Ethiopia has facilitated greater mobility of capital, goods, and people, and incentivized population clustering along major transportation routes

• Improvements in road infrastructure between large cities, as well as increases in population density along these corridors, have increased urbanization rates (agglomeration indices) from 3.7 to 14 percent over the last 2 decades

• This dramatic transformation in the economic landscape is likely to continue, with important implications for future economic growth and public investments in infrastructure.


Amhara Misrak Belesa

Berehet

Debretabor

Farta

Abergele

Kobo

Oromia Adaba

Deksis

Enkelo Wabe

Sire

Gololcha

SNNP Southern Bench

Tigray Tsegede

Several AGP woredas act as ‘bridges’ between PSNP

AGP ‘Bridge’ Woredas


PSNP and AGP Selected Woredas

Region AGP PSNP

Amhara 20 5

Oromia 33 0

SNNP 19 2

Tigray 8 5

Total 80 12

PSNP and AGP Overlap

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Implications for

Development Strategy

46

CAADP CGE AnalysisBaseline Scenario Assumptions

• Agriculture– Land cultivated for each crop follows medium-term trends:

total land cultivated increases 2.6% per year, 2009-2015– Land growth varies across region (1.2% per year in rainfall

sufficient areas, 3.2% per year in drought-prone areas, 3.7% per year in pastoralist areas)

– Crop yield increases account for one-third of the crop production growth

– Overall agricultural GDP growth: 4.0%/year– Note: population growth rate is 3.0 percent/year

• Non-agricultural output growth based on historical medium-term trends: – Manufacturing: 6.5% per year– Services: 6.7% per year

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Ethiopia: Agricultural Growth Outcomes

Initial agric. GDP

share (%)

Average annual GDP growth rate, 2009-2015 (%)

Baseline Cereals Export-crops

Livestock All agric.

Non-agric.

(1) (2) (3) (4) (5) (6)

National (all zones) Agriculture 100.00 3.95 4.90 5.36 5.96 5.98 6.06

Cereals 32.98 4.96 7.38 7.41 7.63 7.68 7.82 Pulses & oils 9.37 3.31 3.53 3.94 4.10 4.12 4.03 Horticulture 6.71 4.69 4.81 4.86 4.96 4.98 5.09 Export crops 10.92 3.77 3.77 7.36 7.36 7.36 7.37 Other staples 8.00 3.02 3.19 3.13 3.22 3.24 3.11 Livestock 32.02 3.18 3.27 3.31 4.97 4.99 5.10

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Ethiopia: Impacts on Prices: “All Agriculture” Scenario

0.800

0.825

0.850

0.875

0.900

0.925

0.950

0.975

1.000

1.025

1.050

2005 06 07 08 09 10 11 12 13 14 15

Re

lati

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rice

ind

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= 1

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Teff

Wheat

Maize

Sorghum

Pulses

Tobacco

Coffee

Cattle

Poultry

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Ethiopia: Impacts on Poverty

22.7

17.6

40.0

13.3

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Nat

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Baseline scenario

All agriculture scenario

With non-agriculture scenario

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Conclusions: Agricultural Growth

• Agricultural growth is desirable, achievable and would reduce poverty in half by 2015

• It may not be that easy: There is no cause for complacency!

• Currently, on average, productivity of fertilizer on cereals is low

– Recent yield growth is still not well understood

– Combination with improved seed and extension is likely required

51

Implications for Development Strategy

• Differentiated growth strategy by regions may be best strategy– AGP in higher potential areas: focus on increasing

agricultural productivity and improving marketing channels– PSNP and OFSP in drought-prone, food insecure areas:

provide a safety net and help food insecure households build up assets and raise incomes

• Anticipate increased urbanization and plan public investments to promote growth of market towns and urban hubs

• Gain the benefits of competitive international trade by maintaining price incentives for production of agricultural and non-agricultural tradable goods by appropriate real exchange rate policy

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