Improving the Impact of Market Reform on Agricultural Productivity in Africa: How Institutional Design Makes a Difference



1. INTRODUCTION

Poor performance of economies characterized by direct government control over markets has
induced policy changes throughout the world regarding the role of government in economic
affairs. The ideology of the private enterprise - market economy has promoted transitions in many
economic systems, including widespread reform of agricultural marketing and pricing systems. In
Africa since 1980, more than 30 countries have undertaken agricultural policy reforms as part of
broader structural adjustment programs (Donovan 1996; Jayne and Jones 1997; Seppala 1997).
While there remains substantial debate over the welfare effects of these reform programs, the
realities of fiscal and administrative constraints of most African governments have led to a
situation in which agricultural policy debates now center less on whether and where to apply
market-oriented prescriptions, and more on how to implement these policies.1

Many advocates of market reform have argued that the transition from an economy with
extensive, direct government controls to a market-based economy would raise productivity. Their
arguments are usually as follows: (1) liberalized input and output markets would increase farm
profitability by increasing average output prices and reducing input costs, thereby spurring farm
investments and commercialization; and (2) farm investment and commercialization would lead to
dynamic changes throughout the economy to support structural transformation (e.g., Johnston
and Mellor 1961). However, market economies have varied widely in their performance. These
differences cannot be explained simply by the extent to which governments have stopped
“intervening in the market.”

The objective of this paper is to review the emerging empirical record of agricultural policy
reform and agricultural productivity in selected countries in Africa, to identify key factors that
account for variations in productivity growth across the newly-liberalizing food systems in these
countries, and to analyze how the availability of more productive agricultural technologies affects
the efficacy of policy reform. The paper argues that a neglect of the institutional foundations of
market development has impeded productivity growth in African agriculture. These limitations
are due in part to assumptions about how markets would develop, and due to failure to examine
the institutional underpinnings of these markets and hence the incentives (or lack thereof) for
investment and growth. The paper concludes by identifying options for supporting productivity
growth and food security through strengthening the incentives to participate and invest in the
newly-liberalizing agricultural input and output markets in the region. The paper focuses on
sectoral issues in agriculture, and acknowledges that macroeconomic policy changes, while not
explicitly addressed here, have also had major effects on the functioning of agricultural systems in
Africa.

The organization of the paper is as follows. We first review the trends in agricultural production
and productivity during the post-reform period in the selected study countries. The trends show
that response to agricultural policy reform has shown wide variability across countries, and that

1 This emerging policy environment is also noted in South America by de Janvry, Key, and Sadoulet
(1997).



More intriguing information

1. Skill and work experience in the European knowledge economy
2. Firm Closure, Financial Losses and the Consequences for an Entrepreneurial Restart
3. The name is absent
4. The English Examining Boards: Their route from independence to government outsourcing agencies
5. Consumer Networks and Firm Reputation: A First Experimental Investigation
6. On Evolution of God-Seeking Mind
7. The name is absent
8. Prevalence of exclusive breastfeeding and its determinants in first 6 months of life: A prospective study
9. Regionale Wachstumseffekte der GRW-Förderung? Eine räumlich-ökonometrische Analyse auf Basis deutscher Arbeitsmarktregionen
10. Evidence-Based Professional Development of Science Teachers in Two Countries
11. The name is absent
12. The Role of State Trading Enterprises and Their Impact on Agricultural Development and Economic Growth in Developing Countries
13. Reversal of Fortune: Macroeconomic Policy, International Finance, and Banking in Japan
14. The name is absent
15. A model-free approach to delta hedging
16. Delayed Manifestation of T ransurethral Syndrome as a Complication of T ransurethral Prostatic Resection
17. The name is absent
18. Self-Help Groups and Income Generation in the Informal Settlements of Nairobi
19. FOREIGN AGRICULTURAL SERVICE PROGRAMS AND FOREIGN RELATIONS
20. The name is absent