Declining Agricultural Commodity Prices: Productivity Gain or Immiserising Growth?(No. 74 Economic Papers)

What are the best strategic options for developing country governments to improve rural living standards through agricultural growth? Tropical commodities such as coffee, sugar and rice are experiencing a long-term decline in prices. This presents a particular problem for producers, since these commodities have traditionally formed the core of agricultural exports of most developing countries since the 1960s.The European Commission has argued comfortingly that declining prices are driven mainly by productivity gains, but the analysis presented here suggests otherwise. Instead the authors find evidence that the difference in productivity levels between countries is increasing, with some falling further and further behind. Diversification into higher value-adding agricultural industries will be difficult without dramatic improvements to rural infrastructure and institutional support. Since these improvements are unlikely to be achieved, the authors conclude that the major objective for agricultural producers in developing countries must remain productivity gains in existing commodity industries.

Table of Contents:
Executive Summary 1. Background to the Study 1.1 The Setting of the Research Problem 1.2 Research Objectives 1.3. Plan of the Study 1.3.1 Individual commodity studies or a sector-wide analysis? 1.3.2 Tasks undertaken 2. Review of Commodity Production and Export of Selected Tropical Commodities, 1970-2002 2.1 Importance of Selected Tropical Commodities in the Domestic Economy 2.1.1 Export quantities of the selected tropical commodities in all countries 2.1.2 Export quantities of the selected tropical commodities in sub-groups of countries 3. Is there Evidence of Immiserising Growth in Developing Country Agriculture? 3.1 The Mechanisms of Immiserising Growth 3.2 Evidence of Immiserising Growth 4. Research Agenda 4.1 Estimation of Productivity Change in Developing Country Agriculture 4.1.1 Defining total factor productivity and labour productivity 4.1.2 Processes generating productivity change in agriculture 4.2 Calculating Trends in Prices for Tropical Commodities 5. Methods of Analysis 5.1 A Model for Estimating Change in Total Factor Productivity 5.1.1 Reasons for choosing an output orientation 5.1.2 Use of Malmquist indices to measure changes in total factor productivity 5.2 Explaining Changes in Total Factor Productivity in Developing Agriculture 5.2.1 Model estimation 5.2.2 Proportion of selected tropical commodities to total exports 5.2.3 Other factors 5.3 Relative Effects of Productivity Change and Price Change 5.3.1 Measures to compare the relative effects of productivity and price change 5.3.2 Calculating the single factoral terms of trade 6. Data and Variables 6.1 Period Analysis and Country Coverage 6.1.1 Study period 6.1.2 Countries to be studied 6.2 Production 6.2.1 Description of production data 6.2.2 Manipulation of production data 7. Results 7.1 Trends in Commodity Prices 7.1.1 Export unit values 7.1.2 Producer prices 7.2 Trends in Productivity in Agriculture

About the Author :
Euan Fleming is an Associate Professor in the School of Economics at the University of New England, Armidale, New South Wales, Australia. D. S. Prasada Rao is a Professor in the School of Economics and the Director of the Centre for Efficiency and Productivity Analysis at the University of Queensland, Brisbane, Queensland, Australia. Pauline Fleming is a Lecturer in the School of Economics at the University of New England, Armidale, New South Wales, Australia.