institutional innovation and investment in rural public goods for development and poverty reduction

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

INTERNATIONAL FOOD

POLICY RESEARCH INSTITUTE

What kind of a World in

2050?

Now 1 : 4 : 1-Then 1 : 4 : 4 ?

1750 1770 1790 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2010 2030 2050 2070 2090 2110 2130 2150

Weltbev ölk erung

0

1

2

3

4

5

6

7

8

9

10

Source: UN

Number of food-insecure people,

1970, 1999, and 2015 (trend)

Source: FAO (2000a, 2002); Bruinsma(2003).

959

799

610

1970 1999 2015

0

200

400

600

800

1000

1200Millions East & Southeast Asia

South Asia

Sub-Saharan Africa

Latin America

West Asia & North Africa

Approximated numbers of farms (1990s)

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.

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

Parliaments and Decentralized Elections

Low and

Middle

Income

Countries

25 42 13 2 82

Number of election tiers

No

elections1 2 3 Total

Source: Own calculations based on data from UNDP 1999 and WDR 1999/00.

Overview of Presentation

I: Changing Context and Changing

Issues

II: Institutions, Innovations, and

Public Goods

III: Agenda for Further Research

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

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?

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

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?

Research Questions due to Changing

Contexts and new Concepts



Issues


Public Goods


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)

Conceptualization of Institutional

Linkages (Adapted from World Bank, World Development Report 2003)

INSTITUTIONS - Rules

Informal Formal

Organizations

Rules Regulations Government Agencies

Networks Firms

Laws Civil Society

Organization

Norms Police

Traditions Constitutions Courts

Markets

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

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

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

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

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

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

R&D

254 224 44 n.s.

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

Decentralization and Poverty

Reduction - Linkages

Source: von Braun, Grote 2002

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)

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.)

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

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

Main Telephone Lines and

GDP/capita, 2000 (138 countries)

China Peru India

Lao P.D.R.

Japan

Tanzania

United States

Bangladesh Uganda

Jamaica

0

10000

20000

30000

40000

50000

60000

0 10 20 30 40 50 60 70 80

Main Telephone Lines per '00' Inhabitants

GD

P p

er C

ap

ita (

1995 U

S$)



Issues


Public Goods


“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

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

A promise:

New relevant knowledge for rural

development spreads faster then

ever

institutional innovation and investment in rural public goods for development and poverty reduction

Documents

rural development

global public goods

public goods provision

public responsibility

development poverty

rural growth

rural publicgoods

rural areas