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Catholic Agency for Overseas Development

16 February 2007

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Agriculture production in developing countries

    How is agriculture production related to poverty reduction and development in developing countries?
Agriculture plays a central role in the well-being of developing countries' economies and their people. In the developing world an average of 50 per cent of people make their living from farming and agriculture, and in some countries, this figure rises to over 80 per cent.

There is an intimate relationship between poverty and agriculture. Three quarters of the 1.2 billion people who live on less than a dollar a day, work and live in rural areas. Repeated studies have shown that agriculture is key in the fight against poverty and must therefore play a central role in achieving the Millennium Development Goals.

Agriculture is key to future poverty reduction. Growth in the agricultural sector has a singularly more powerful impact on poverty reduction than any other economic sector1. A one per cent growth in agricultural productivity reduces the number of people living on less than a US$1 a day by up to 1.2 per cent2.

However, according to a study by Carnegie Endowment for International Peace3, agriculture liberalisation will not benefit the majority of developing countries. This is due to several reasons for instance:

  • Many developing countries are net food importers;
  • Some developing countries may lose relative advantages they now enjoy under special preference programs;
  • Many developing countries have widespread small-scale farming that is often uncompetitive and suffers from low productivity. As, in these cases, unskilled rural labour cannot be easily and quickly absorbed by other sectors, there will be a higher cost of adjustment (derived from liberalization) in particular in the case of less diversified economies.
Because of these reasons, liberalisation of these countries' agricultural sectors can lead to significant net losses - with the burden falling heaviest on the poorest sections of their populations.

  1. See for example: Lucia Hanmer, David Booth (2001) "Pro poor growth: why do we need it, what does it mean and what does it imply for policy?", Second Draft August 2001, London and ODI and Timmer, C.P. (1997) "How well do the poor connect to the growth process?" Cambridge, Mass: Harvard Institute for International Development.
  2. Robert Eastwood and Michael Lipton (2001) 'Pro Poor Growth and Pro growth poverty reduction: what do they mean? What does the evidence mean? What can policymakers do?', paper delivered at the Asia and Pacific Forum on Poverty: Reforming Policies and Institutions for Poverty Reduction, held at the Asian Development Bank, Manila, 5-9 February 2001.
  3. Polaski, Sandra. "Winners and Losers: impact of the Doha Round on Developing Countries". Carnegie Endowment for International Peace, 2006. Available at:

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