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What is missing between agricultural growth and infrastructure development?
November 2007
Atsushu Iimi and James Wilson Smith
The World Bank

Acknowledgements: FANRPAN acknowledges the WB website as the source of this report.


Abstract

Although it is commonly believed that aggregate economic growth must be associated with public infrastructure stocks, the possible infrastructure needs and effects are different from industry to industry. The agriculture sector is typical. Various infrastructures would affect agriculture growth differently depending on the type of commodity. This paper finds that a general transport network is essential to promote coffee and cocoa production, perhaps along with irrigation facilities, depending on local rainfall. Conversely, along with the transport network, the dairy industry necessitates rural water supply services as well. In some African countries, a 1 percent improvement in these key aspects of infrastructure could raise GDP by about 0.1–0.4 percent, and by possibly by several percent in some cases.

Introduction

It is natural to expect that aggregate agricultural growth is positively related to infrastructure development. However, how to strengthen such a relationship at the operational level remains debatable. Specifically, it is questionable what type of infrastructures need developing to promote agricultural production and competitiveness. Which farm product is the most important to stimulate overall growth and reduce poverty in developing countries? The current paper, casting light on the significance of agriculture in Africa, aims at examining the potential effects of infrastructure development on agricultural growth.

Following the general overview, the paper will pay particular attention to two commodities that are differently characterized at various levels: coffee and cocoa, and dairy—essentially cow milk. Sub-Saharan Africa is the geographic focus of this paper because the region is and will continue to be relatively heavily dependent on the agricultural sector into the foreseeable future. However, the empirical results are relevant to other regions as well. Methodologically, the paper takes the middle course between the micro and macro perspectives in the sense that it estimates the supply and demand system for a given commodity, while relying on existing aggregate data. There are considerable data limitations to directly answer the above-mentioned questions, and the possible answers may vary across commodities and across countries.1 However, it can be shown that infrastructures would influence coffee and dairy production differently, and different infrastructure services have to be improved to accelerate agricultural growth.

Footnote:
  1. If there existed sector-specific input variables, the empirical growth model could be applied for agriculture sector growth. However, it is difficult to obtain sufficient data representing agriculture-specific physical and human capital and other macro variables, though some data on agricultural employment may be available.

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