The Nexus between Agricultural Productivity, Poverty, and Social Services Provision in Sub-Saharan Africa: An Empirical Analysis

This dissertation contains three essays at the interface of agricultural and development economics. The motivation for this lies in the fact that various studies have shown the agricultural sector to be the main income source for the majority of the global poor and it will hence have to play a key role in the fight against global poverty. The first essay (co-authored by Stephan Klasen) aims to solve a micro-macro paradox on the role of education for agricultural productivity. From a micro perspective, this role is rather unambiguous since the vast majority of studies find that educated farmers exhibit higher levels of agricultural productivity than their uneducated counterparts even after controlling for a variety of potentially important covariates. However, these results stand in sharp contrast to recent cross-country studies applying sophisticated econometric methods which either have not included education variables at all in the model or have only been able to detect insignificant or even puzzling negative coefficients for the education variables used. Against this background, the first essay revisits the importance of education for agricultural productivity from the macro-perspective. Using a panel of 95 developing and emerging countries from 1961 to 2002 that includes data on educational attainment, we show that education indeed has a highly significant, positive effect on agricultural productivity which is robust to the use of different control variables, databases and econometric methods. We can further illustrate that previous macro studies failed to find such an effect due to the inappropriate use of enrolment and literacy indicators. Lastly, extensions to our analysis reveal that only primary and secondary schooling attainment has a significant positive effect on agricultural productivity and that the returns to education (in terms of agricultural productivity) are higher for countries with higher levels of income. The second essay (co-authored by Stephan Klasen) is a methodological contribution to the literature on pro-poor growth. This essay is motivated by the fact that existing research on this topic focuses too far on income and non-income dimensions of well-being and does not adequately reflect the extraordinary importance of agricultural productivity for poverty reduction worldwide. We suggest that it is straightforward and useful to define the poor not only in terms of income, education or health, but also in terms of agricultural productivity. Such an approach can be readily implemented in the pro-poor growth toolbox by slightly modifying some of the existing tools and allows us to look at pro-poor growth from a complementary, agricultural productivity-based perspective. To illustrate the potential of this extended toolbox, we then apply it to three waves of the nationally representative EICV household surveys from Rwanda (years 1999-2001, 2005-2006, and 2010-2011). The results of our analysis indicate that Rwanda achieved in recent years impressive progress in both, income and non-income dimensions of poverty. The new agricultural productivity-based tools reveal that the labor productivity-poor were able to increase their productivity levels relatively (but not absolutely) faster than the labor productivity-rich. Consistent with the main results from the cross-country analysis in the first essay, our results further indicate considerably lower labor and land productivity levels for human capital-poor households. The third essay (co-authored by Simon Lange) contributes to a long literature investigating poor households’ ability to smooth consumption in the event of adverse income shocks. This topic is of great importance given that rural households are typically exposed to considerable risks and the need to hold precautionary savings has been found to generate poverty traps by preventing poor agents from undertaking profitable investments. In the West African context, the main forms in which households may hold such extra savings are grain stocks and livestock. One would thus expect that these assets are consumed or sold in times of economic distress. However, empirical studies investigating the role of livestock as a buffer stock are inconclusive. In this essay, we emphasize that there are actually two strands of the literature pursuing slightly different questions (quantities vs. revenues). We address in our empirical analysis both questions at the same time using two large panel household datasets which cover the 2004 drought in the northern provinces of Burkina Faso. Our results with regard to quantities suggest that livestock sales increase significantly in response to adverse rainfall shocks at the province- as well as the household-level and the need to purchase food is the main motive for such extra sales. In contrast, for the second question (focusing on revenues), we find that large parts of an adverse shock to transitory income are passed on to consumption while there is no evidence for additional revenues from livestock sales. We then show that a drought-induced increase in net sales is offset by a concomitant decrease in livestock prices. This price response renders adjustments to livestock holdings a costly strategy to smooth consumption. It also explains why households bear consumption cuts despite livestock holdings that would allow them to completely offset transitory income losses.