Deutscher Tropentag Goettingen Oct. 8, 2003

1. INTERNATIONAL FOOD
POLICY RESEARCH INSTITUTE
Institutional Innovation and
Investment in Rural Public
Goods for Development and
Poverty Reduction
Joachim von Braun, IFPRI
Deutscher Tropentag
Goettingen Oct. 8, 2003

2. What kind of a World in
INTERNATIONAL FOOD
POLICY RESEARCH INSTITUTE 2050?
Now 1 : 4 : 1-Then 1 : 4 : 4 ?
10
9
8
7
6
5
4
3
2
1
0
1750 1770
1790 1810
1830 1850
1870 1890
1910 1930
1950 1970
1990 2010 2030 2050 W t ev ölk er ng
elb u
2070 2090 2110
Source: UN 2130 2150

3. Number of food-insecure people,
1970, 1999, and 2015 (trend)
1200 East & Southeast Asia
Millions South Asia
959 Sub-Saharan Africa
1000
Latin America
799 West Asia & North Africa
800
610
600
400
200
0
1970 1999 2015
Source: FAO (2000a, 2002); Bruinsma(2003).
Page 3

4. Approximated numbers of farms (1990s)
Farm size (hectares) % of all farms # of farms (millions)
<1 73.20 334.00
1–2 11.70 53.30
2–5 8.90 40.30
5–50 5.30 24.60
>50 0.90 4.00
Total 100.00 456.10
Sources: von Braun, 2003, Estimates based on FAO World Agricultural Census (1990) and
Supplement to FAO World Agricultural Census (various years, 1990–97), and various country
statistics.
Page 4

5. Parliaments and Decentralized Elections
Number of election tiers
No 1 2 3 Total
elections
Low and 25 42 13 2 82
Middle
Income
Countries
Source: Own calculations based on data from UNDP 1999 and WDR 1999/00. Page 5

6. Page 6

7. Overview of Presentation
 I: Changing Context and Changing
Issues
 II: Institutions, Innovations, and
Public Goods
 III: Agenda for Further Research
Page 7

8. Elements of the Changing
Global Context
 Globalization in trade and investment
 Spread and deepening of democracy
 Decentralization of state control
 Rapid change of technology
 Increasing inequality
 Increased global health linkages
…are not separate trends but linked
Page 8

9. Changing Global Food and
Agriculture Systems
 Growing role of retail industry (super
markets)
 Intensified rural-urban linkages
 Changing governance in global
natural resource use
 New technologies
 Continued protectionism?
Page 9

10. Rural Development Down and Up
 Rural Development falling off the
agenda in the 1980s-90s (declined
by US$7 billion since 1980 to late
1990s
 A recent come back for rural
development ? !
 Unhealthy fluctuations
Hoping for Rural Development Rather
than Focused Initiatives
Page 10

11. Research Questions due to Changing
Contexts and new Concepts
 What role for institutions in rural
development ?
 How can institutional innovation be
stimulated? (“How to?” and “who?”)
 What links from institutions to poverty
reducing investments in public goods?
 What links from institutions to poverty
reducing technology?
Page 11

12. Overview of Presentation
 I: Changing Context and Changing
Issues
 II: Institutions, Innovations, and
Public Goods
 III: Agenda for Further Research
Page 12

13. What are institutions?
 ‘Institutional Environments’ :
Formal (laws, regulations, property rights)
or informal (values, cultures, norms) ‘rules
of the game’ that influence transactions
costs
 ‘Institutional arrangements’ :
Institutions of governance; linkages between
organizations (‘players’), connected by
laws, policies, regulations, norms, which
determine competition, cooperation, and
coordination (at costs)
Page 13

14. Conceptualization of Institutional
Linkages (Adapted from World Bank, World Development Report 2003)
INSTITUTIONS - Rules Organizations
Informal Formal
Rules Regulations Government Agencies
Networks Firms
Laws Civil Society
Organization
Norms Police
Traditions Constitutions Courts
Markets
Page 14

15. Why and What Public Goods?
Why public responsibility to provide goods?
1. Market failure
2. Equity and rights
What are public goods?
1. Non – rival (but not „pure‟)
2. Non – exclusive (but not „pure‟)
Time, location, and context dependent
Local, national, global public goods
Page 15

16. Connections Between Institutions
and Rural Public Goods
 Institutions are needed for efficient and
equitable provision and management of
public goods
 Public goods provide foundation for rural
growth and market development
 The rural poor are especially dependent
on public goods provision due to …
- imperfect markets,
- low voice / power
- Lack of access to information
->High transactions costs
Page 16

17. Institutional arrangements in rural areas
– why hirarchies / markets / hybrids?
 Asset specificity
 Incomplete contracts
 Human propensity to opportunism
-> “non-standard”- contractual forms as
organizational solutions
See O. Williamson
Page 17

18. Examples of Public Goods
Important for the Rural Poor
 Food security
 Education
 Health care
 Access to political rights
 Property rights (Rule of law for land and
water, etc.)
 Access to information
 Public Agro-scientific research
 Natural resources and environmental
quality
 Equitable fiscal/monetary policies Page 18

19. How to set priorities among alternative
public goods investments?
High Returns for Development / poverty?
 Infrastructure for mobility (roads?)
 Education (fertility; mortality)
 Agriculture research and
development (growth and poverty)
 Health (productivity)
Assets with comparative advantages ?
Requires coordination to avoid
(investment) failure
Page 19

20. India and Returns from Public
Spending
Fan, S., S. Thorat, and N. Rao (2003)
India: Poverty Returns to Investment
Number of poor reduced per Million Rps Spent
1960s 1970s 1980s 1990s
Roads 229 722 717 474
Education 13 130 168 154
Irrigation 42 125 116 6
HYV Agric 254 224 44 n.s.
R&D
Page 20

21. Providing Public Goods Through
Institutional Innovation
1. Roles of democracy, participatory
government, and good governance
2. Decentralization and Devolution
3. Property rights establishment
4. Markets, and Coordination
5. Collective action in natural resource
management
6. Institutions for Technology
Page 21

22. Decentralization and Poverty
Reduction - Linkages
Source: von Braun, Grote 2002
Page 22

23. 2. Decentralization and Devolution
Is decentralization always good? „elite
capture‟, local management
 Dec. can create incentives for pro-
poor public goods delivery
 Administrative-, and fiscal- without
political decentralization?
Optimizing decentralization! (scale,
sequence, types of public good)
Page 23

24. 6. Institutions and Technology
A. Example Agric. Technology
 Stress-resistant, higher-yielding varieties
 Focus on „low-potential‟ areas (livestock)
 Achieving higher yields without sacrificing
natural resources (aquaculture)
 Consumer oriented crop technology
(price, quality, health)
Time, location, and context dependent
Why not just private sector? (CGIAR etc.)
Page 24

25. Technology, contd.
B. Example Information Technology
 Network externalities and increasing
returns to scale
 Reduces transactions costs (price of
information)
 Can foster pro-poor institutional
arrangements
 Can strengthen pro-poor rights
Privatization / contracts key ICT institutions
Page 25

26. Access to phone - effects in rural
Peru and Bangladesh
Net benefit per call
Peru 1.45 – 2.91 $
Bangladesh 0.11 – 1.59 $
Poorest 25% benefit more
Increased participation in land, labor,
and high value goods markets (+8%)
Source: S. Chowdhury, 2002
Page 26

27. Main Telephone Lines and
GDP/capita, 2000 (138 countries)
60000
50000
GDP per Capita (1995 US$)
United States
40000
30000
Japan
20000
10000
Peru Jamaica
India China
Lao P.D.R.
0
Tanzania
Uganda Bangladesh
0 10 20 30 40 50 60 70 80
Main Telephone Lines per '00' Inhabitants
Page 27

28. Overview of Presentation
 I: Changing Context and Changing
Issues
 II: Institutions, Innovations, and
Public Goods
 III: Agenda for Further Research
Page 28

29. “Technological and Institutional Innovations
for Sustainable Rural Development”
Old temptations:
 Fixing it with smart institutions?
 Fixing it with smart technology?
 Pushing for over-extended public
goods provisioning
Chance: seeking new synergies
Page 29

30. A new research focus on linkages between
areas of innovation for rural development
(1) Exploring synergies between investment
in public goods, technologies, and
institutional innovation
(2) Research on coordination of rural public
goods provisioning (market and non-
market; contracts, accountability,
incentives, transparency)
(3) Explicitly exploring distributional
effects of alternatives (ex-post and ex-
ante)
But: not neglect the innovation potentials
in the components
Page 30

31. A promise:
New relevant knowledge for rural
development spreads faster then
ever
Page 31