and the poorest 20% for only 7% of income (World Bank, 1999). The distributions of assets and other resources, particularly land, are also skewed.

Poverty in Dominican Republic is mostly a rural phenomenon (World Bank 2001). Rural poverty rates are about 40% compared to about 20% in urban areas, and about 60% of the poor are located in rural areas. A high proportion of rural poverty is concentrated in certain parts of the country, particularly in areas along the Haitian border. Rural poverty and agriculture are inexorably linked. While many farmers who specialize in agriculture are not poor, smaller scale farmers, those who live in less favored areas, and people dependent on agricultural wage labor are more likely to be counted among the rural poor (World Bank, 2001).

## **Dualism in Dominican Agriculture**

Dominican agriculture is characterized by pronounced dualism. This dualism exists across and between specific sectors. For example, in 1992, 31% of coffee producers were classified as low income and 15% as high income (World Bank, 2001). At the same time, 14% of cocoa producers were classified as low income and 8% as high income. There were (proportionally) about twice as many poor coffee producers as cocoa producers, but about twice as many high income coffee producers as cocoa producers. Thus, dualism appears more pronounced in coffee. Income and land distributions vary dramatically across other crops too. Dualism makes it difficult to make crop-specific generalizations about producers. The dualism results from wide differences in assets, access to technology, and access to markets.

Recent growth in exports and dynamic agriculture sectors may not have directly contributed to rural poverty reduction. Medium-scale and other farmers with high levels of human and physical assets have been the main beneficiaries of this growth, although the poor benefit indirectly through labor market linkages and lower food prices. Dualism in Dominican agriculture weakens the relationship between agricultural growth and poverty reduction, but certain forms of agricultural growth can clearly benefit the poor (World Bank, 2001).

The rural poor can also benefit from growth in other economic sectors. It is estimated that less than 30% of total rural income is directly generated from agricultural activities (Lopez, 2001). Another 15% originates in rural manufacturing and services, much of which are linked to agricultural activities. The remaining 55% of rural incomes come from non-agricultural activities and non-employment sources such as government transfers and private remittances. As a result, a strategy intended to promote faster growth and poverty reduction in the rural sector should focus not only on promoting growth in agriculture sector, but also in other productive sectors (World Bank, 2001). As will be highlighted in this report, many coffee and cocoa producers receive significant shares of their incomes from other agricultural activities and non-agricultural activities. Thus, this message of the need for a broader rural economic approach than a more narrow agricultural or commodities approach is a key message.

# **C. Overview of Factor Markets (Labor, Land, Finance)**

In this section we present an overview of factor markets, with a focus on the agricultural sector.

# **C.1 Labor Markets and Human Capital**

Over the past few decades, the share of labor in agriculture has fallen, but the absolute number of persons employed in agriculture has remained relatively constant (table I.5). Important changes have recently occurred in rural labor markets in the Dominican Republic. Non-agricultural 12