1 11/3/04PP253/ARE253, Fall 2004 Alain de JanvryHandout #10: Rural development policy and household and community behaviorConceptual framework for integral rural developmentProgram implementation process Rural development interventions Policy-making process(Investments by governments, international agencies, NGOs) Program design processNatural (land) I. Programs for access to assets (target population)Household Physical Land reform, market-assisted accessasset Human (education) Conditional cash transfers for humanpositions Financial development(Capabilities) Social (organizations) Promotion of organizationsMarkets: International and domestic II. Programs to improve the context Other actors:Context Governance: national, regional, and local - International market for agriculture National and internationalwhere assets Policies - Rural impact assessment: rural lensare used Public goods (infrastrusture, tech.) - Territorial development: RDD(Opportunities) Rural institutions (financial, insurance) Quality of projects - Rural development for economic incorporation Policy-making processAccountability to poor Support to decentralization Program design processFairness in access to benefits Market reforms: Trans costs, finance, insurance (Political support)Control over corruption "New" agriculture, ag technology (IPG) Dialogue and capture CDD for local public goods Coalitions Agriculture (traditional, "new") Poor-Non-poor linkages Political institutionsLivelihood Rural non-agricultural employment Functionalize migrationstrategies Migration (seasonal, permanent) Community and producers organizations(Pathways Pluriactivity (mix of the above) Payments for environmental services Poor as social actorsfrom poverty) Transfers: public and privateIncome/poverty (by gender and age) III. Programs for social protectionOutcomes Security/Vulnerability Safety nets(Well-being Equality Social securityindicators) Human development: health, education Transfer programs: HIV/AIDSSustainability (environment) Social status and rights (inclusion)IV. Programs for social incorporation (Citizenship)(empowerment, representation, voice) Organizations Grants for technical support InformationWell-being determination process(Behavior of the rural poor and their organizations)2 11/3/04Part II: Household behaviorI. Importance of peasant households (“family farmers”)Numerical importance: 1.2 billion households, more than half of humanity.Economic importance: role in production (Africa, India, but also Asia and Europe). US family farms.Welfare importance: among poorest of poor, migration to cities; 70% of world poor are rural.Political importance: rebellions and revolutions (Mexico, China, Vietnam). Political vote (Europe, Japan).Questions: Who are they? What do they do? What determines their welfare? How can it be improved?II. Definitions of peasant householdsHousehold = people who eat together = “family” (nuclear, extended).The household as a unit of analysis: integrates production, consumption, and reproduction decisions.2.1. Definition 1: Ellis (Peasant Economics): six features:1. Live mainly from agriculture (including herders, foresters, fishermen): have access to natural capital.2. Use mainly family labor in production.3. Are partially integrated in markets (role of self-sufficiency in consumption, self-provision of inputs).4. These markets are imperfect (transactions costs, not competitive): role of market failures.5. Are usually members of communities (access to CPR, moral economy (mutual insurance), land and laborcontracts, interlinked transactions, patron-client relations, provision of local public goods).6. Are part of a larger non-peasant society where they are dominated (surplus extraction, politicaldomination). No society is dominated by peasants (Wolf).2.2. Definition 2: Based on labor market integration (Figure 1)Price bands model (transactions costs on labor market): labor market failure.Differential endowments in natural capital: different levels of demand for labor to use this capital(from D1 to D6 as farm size A increases). Asset positions define social class membership.On Hire in“Shadow w” Self XOn OffLabor useSocial class:heterogeneityFarm size(Assets)Labor demandOff-farmOn-farmHire in andsuperviseLandless< A2D1 to D2++00Sub-familyA2 to A3D2 to D3++0FamilyA3 to A4D3 to D40+0Small commercialA4 to A5D4 to D50++Large commercial> A5D5 to D6...0+++Peasants (differentiated, heterogeneous group of households):Sub-family farmers: work on farm and hire out (“pluriactive”).Family farmers: self-sufficient in labor.Small commercial farmers: work on farm and hire in labor, with number of hired workers less thanthe number of working family members (say).Non-peasants:Lower limit = landless: only hire out.Upper limit = large commercial farmers: hire more labor than they use family labor (say). Familylabor is increasingly supervisory of hired labor.Correspondence with Ellis definition: 1, 2, 3, and 4 satisfied.2.3. Differentiated labor allocation responses to an increase in wageOff-farmOn-farmHire in andsuperviseTotal work byhouseholdTotal laborapplied to farmSub-family+–0+–Family00000Small commercial0+–+–Importance of heterogeneity: opposite responses for on-farm work between sub-family and smallcommercial peasant households.wIII. InOff Response to wage increase LIII. Market failures and land reformDifferential asset positions: Farm size owned A Is there an inverse relation between farm size and land productivity?Differential exposure to market failures across households:Captive resources with zero opportunity cost off-farm (child and elderly labor, some female labor,supervision abilities).Transactions costs in accessing markets: own labor cheaper than hired labor.Moral hazard in hired labor: need supervise hired labor. Family labor is self-motivated as residualclaimant.Credit constraint with land as collateral.Cheaper capital for larger farmers (fixed costs, economies of scale on loan size)Example: Two market failures (Eswaran and Kotwal model)Labor market failure (family labor cheaper than hired labor)wLaborMarketwage wTC in hiringTC in sellingw paidin hiringw receivedin sellingS(w, family size):Supply of familylabor for all uses(on, off)D1(A1)D2(A2) Demand of labor for farmD3(A3)D4(A4)D5(A5)D6(A6)3 11/3/04Credit market failure (credit proportional
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