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The purpose of this book is to investigate the relationship between agricultural investment and productivity in developing countries. Investment is viewed as an important aspect to enhance agricultural productivity, and the key to promoting long-term growth. Although technology and policy are other important long-term factors, the book focuses on investment because public, private and international investments are declining. Low levels of investment in agriculture bode poorly for long-term prospects of achieving food security in the developing world. A growing agricultural sector contributes to overall growth and improved food security in developing countries where the agricultural sector provides livelihood directly and indirectly to a significant portion of the population, especially in rural areas, where poverty is more pronounced. Hence, improving the production capacity of agriculture in developing countries through productivity increases is a critical component of improved food security. The objective of this book is to provide an understanding of the linkages between agricultural investment and productivity where agricultural investment includes not only investments in physical capital but in human and social capital as well as natural resources.

The book reviews studies investigating the relationship between investment and productivity, as well as highlights some new findings, methodology and data issues. The book is divided into three sections. The first section focuses on the methods developed and overall findings about the relationship between investment and productivity. Special emphasis is placed on a methodology for incorporating agricultural natural resource depletion in calculating measures of growth. The first paper, Agricultural Investment, Production Capacity and Productivity, by Zepeda, provides an overview of the terminology, different methods used in the analysis of measurement of productivity and a review of the productivity literature. This provides background and context for the subsequent papers. Paper 2, An International Analysis of Agricultural Productivity, by Chavas, is an international comparison of agricultural productivity of selected countries from 1961 to 1994. A non-parametric method is used to illustrate how this approach can be used with both cross-section and time-series data. Paper 3, Agricultural Productivity and Natural Resource Depletion, by Lee and Zepeda, presents a model that incorporates natural resource depletion. Until now, models of productivity measurement have not taken this into account even though many economists recognize the importance of environmental disinvestment. The paper outlines a methodology for incorporating this analysis as well as data needs.

The second section of the book provides more detail on regional differences in the relationship between agricultural productivity and investment among developing countries. The factors that enhance and limit production growth are examined, with an emphasis on investment needs. These factors include the amount and quality of inputs, how they are combined (i.e. technology), human ability or expertise in implementing technology (human capital), environmental factors and agricultural policies. Paper 4, Agricultural Productivity for Sustainable Food Security in Sub-Saharan Africa, by Wiebe, Soule and Schimmelpfennig, focuses on sub-Saharan Africa, comparing partial and total measures of productivity among the countries in the region. Paper 5 by Chang and Zepeda, entitled Agricultural Productivity for Sustainable Food Security in Asia and the Pacific, examines trends in Asia and the Pacific, looking at how the region compares to other regions in partial and total productivity as well as how returns to public and private investment compare. Paper 6, Agricultural Production in Peru (1950-1995): Sources of Growth, by Velazco is an exploration of how agricultural production and investment have evolved over time in Peru in the context of land policy, civil unrest, debt and structural adjustment. The role of investment is estimated using production and supply functions.

The third and final section examines the relationship between policy, investment and productivity. Two case studies are presented to examine the factors affecting agricultural growth and individual decisions to invest in agriculture. Paper 7, A Comparison of Commercial and Smallholder Sectors in Zimbabwe and South Africa, by Wiebe, Schimmelpfennig and Soule, is a meso- level analysis of investment among small and commercial agricultural producers in Zimbabwe and South Africa. Paper 8, Determinants of Agricultural Investment by Small-Scale Producers in Peru, by Velazco and Zepeda is a micro-level analysis of individual agricultural producers in the Highlands of central Peru and their motives to invest. This final section emphasizes how characteristics of agricultural producers can influence the incentives to invest and therefore the need to accommodate for heterogeneity in the development and implementation of policy. It also identifies where there are gaps in national data on the investments of small producers.

Overall the book provides an overview of current thinking and findings about the relationship between agricultural investment and productivity. This includes theoretical and methodological developments, such as incorporating natural resource depletion. It also underlines, through the concerns expressed by many authors about data scarcity and limitations, that neglect of information needs hampers the forward-looking assessment of sustainability of agricultural and rural development. The book also reviews findings about the linkages of investment and productivity in the context of other important factors such as land policy, debt, civil unrest and structural adjustment programmes. This places agricultural investment solidly as a crucial but integral component of an overall policy to promote agricultural productivity.

Jacques Vercueil
Agriculture and Economic
Development and Analysis Division

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