productivity growth and increased farm incomes are prerequisites for structural transformation.. Increased farm income leads to derived demand for nonfarm products,.[r]
(1)(2)Characteristics of the Rurality
Dominated by farmers (peasants) and agricultural production is the main sector of economy as a primary means for support and sustenance
The main form of socio-economic organization based on agriculture and farming activities
Depending upon the urban in many different aspects
Low levels of income, living standards, technological innovation, democracy, and social equity as compared to that of the urban
(3)Characteristics of the Rurality
Rural societies are part of larger societies, but retain their cultural identities
Rural societies have their own certain cultural attributes in the sense of attitudes, values and other ideological
elements
Characteristics of rural economy:
(4)High Population Growth: Potential problems?
Increasing resource scarcity: less land per capita Increasing aggregate demand for food
Population is growing faster than growth income (still right?)
(5)Low labor productivity: Potential problems?
Labor productivity: level of output per unit of labor inputs (hour, day, year)
Less output per a given input
(6)High Poverty Levels: Potential problems?
Lacking accesses to productive resources and services Insecure livelihoods
Increasing income inequality Vicious cycle of poverty
(7)Limited access to land: Problems?
Access to land: Ability to access to land resourses for productivities
Land is one of the most important capital to rural livelihoods, especially of the poor
Limited access to land lacking essential agricultural resource – limiting production possibilities
(8)Average Landholding per Farm Household in
Vietnam (2002)
Area (m2)
Categories
Poorest Poor Middle Rich Richest
Annual crop land
4,778 3,898 4,333 4,610 4,867
Perrennial crop land1,114 1,189 1,427 2,239 2,649
Inland fishery land
175
209
335
454 1,181
Total
5,067 5,296 6,195 7,301 8,697
(9)Poverty Rate of Farm Household in the Rural
Mekong Delta by Landholding
Household Landholding (m2)
Poverty rate (%) Share of household in total (%)
No land 47.4 18.1
< 2,500 36.1 12.2
2,500 – 5,000 31.9 15.4
5,000 – 7,500 22.4 13.0
7,500 – 10,000 22.2 8.0
10,000 – 12,500 18.0 8.1
12,500 – 15,000 21.0 4.6
< 15,000 11.8 20.6
Total 27.5 100
(10)Some concepts related to Structural
Transformation
Structure?
Transition?
(11)Transition (WB 1996:1, 4-5): The long - term goals of
transition is to build a thriving market economy capable of delivering long-term growth in living standards
[S]ystemic change [is] involved: reform must penetrate to the fundamental rules of the game, to the institutions that shape behavior and guide organizations This makes it a profound soical transition as well as a passage from one mode of economic organisation to a throughly different one [it] must unleash a complex process of creation, adaptation, and destruction
(12)Structural transformation is a process by which the relative contribution of non-agricultural sectors to overal economy rises as agriculture‘s share declines in relative terms In
absolute terms, however, agriculture continues to grow and contribute to overal economic growth
Agri productivity growth and increased farm incomes are prerequisites for structural transformation Increased farm income leads to derived demand for nonfarm products,
which in turn leads to growth of small and medium-size enterprises, manufacturing and services in rural areas, small towns and larger urban areas
(13)Lifting the Output per Farm Worker: the Goal in
Structural Transformation
The use of biological – chemical -mechanical inputs in the farm process
New technological and organizational knowledge
(14)The Process of Structural Transformation
Mechanism: specialization including both of specialization along specific crop lines among farmers and transferring a host of functions formerly carried out by the households to specialist producers
Increasing income per capita and changing GDP structure: The decline in agricutural sector and the rise of the non-agri sectors
Increasing division of labor in all economic activity and change in labor share in agri
Change in rural non-farm activities
Change in farm cash receipts and disbursements
(15)Two dimensions:
Changing output shares
Reallocation of the labor force
In both dimensions structural transformation is
characterized by relative decline in agricultural sector, but absolute levels of agricultural output and
(16)Patterns of Stuctural Transformation
Changing output shares Relative decline in the agriculture sector while the parallel rise in manufacturing as the most dynamic sector until a middle
income levels (from 5-8% to 30-35%), and then increase in services in high-income levels – Every developing country traverses this common pathway of structural transformation
The common pathway can be quite wide Sectoral shares are influenced by the natural resoruce endowment, the size of internal markets and economic policies:
e.g Japan and Tawain: policies favoring manufactured exports
e.g India and China: the size of internal markets e.g Nigeria, Indonesia, Malaysia: natural resources
(17)Patterns of Structural Transformation
2 Changing labor shares
The shares of agri labor falls continuously, but wider range: from 70% - 80% to 2- 6%
Per capita output in agr tends to rise, productivity growth in agricultural is more rapid than in any other sector
Output per agri worker is below national average until late in structural transformation
Employment shares in all sectors increase, but in other
(18)Link between Farm and Non-farm Sector
In lower income countries, scale members of rural
households devote their large portion of time to non-farm tasks (35-50%)
As specialization increases these tasks are shifted away from rural households
Farm sector supplies food, labor, and share of export earnings
Non-farm sector supplies inputs, infrastructure, and new techologies
(19)Institutional aspects of structural transformation
1 Market development – commodity, labor, finance
2 Shift from peasant toward commercial agriculture
3 Quality of life indicators
(20)Institutional aspects of structural transformation
1
Market development – commodity, labor, finance Commodities markets: from simple to complex
Labor markets: transferring various functions out of the
households non-farm rural economy emerges shifts in labor markets; specialization by commodity and by skills
(21)Technical change and productivity growth
Technical change encompasses the inter-connected
elements of new technology, augmented labor skills
and improved organization efficiency: factor raises
long – term productivities
Land-saving technique (seeds, bio-technology)
Labor-saving / land-augmenting technique (mechanization, irrigation)
(22)Elements of Social Change
1 Changes in traditional social structure created by:
Proliferation of firms and public institutions
The emergence of new technologies and marketing relationships
Shifts in individual behavior
2 Elements of changes
From kinship to society: difficult and uneven
From farming to manufacturing
From rural to urban
Demographic transition
(23)Policy Implications of Structural Transformation
Specialization and technological change are driving forces that transform an agrarian economy into a diversified and highly productive economy
Domination of agriculture at the early stage of structural transformation, but a diverse non-farm sector also figures large in unspecialized rural economy
(24)Policy Implications of Structural Transformation
A country’s policy choices are more important than endowments of land, oil, timber, and other natural
resources right policies can sustain productivity growth
Right policies depend on a country’s stage of structural transformation
(25)Policy Implications of Structural Transformation
Structural transformation is a process of interaction between the cultural-institutional system and the
economic subsystem and the nature in which will vary from country to country depending on preconditions and endowments
d farming