Rapid urbanization in developing countries stimulates interest in understanding the impact of the nature of urbanization on the economies of these countries. Secondary towns have been shown to lead to more inclusive growth and poverty reduction compared to primate cities. This is because rural migrants are more likely to participate in the non-farm sector of secondary towns. However, less is known about how urbanization patterns affect agricultural production. The new study published in the June issue of World Development investigates this relationship between agriculture and different sized cities.
The authors from University of Leuven and IFPRI develop a theoretical model to analyze how farmers’ proximity to cities of different sizes affects agricultural prices and intensification of farming. They use large-scale survey data from producers of teff, a major staple crop in Ethiopia, relying on unique data on transport costs and road networks and implementing an array of econometric models. The study finds that agricultural price behavior and intensification is determined by proximity to a city and the type of city. While proximity to cities has a strong positive effect on agricultural output prices and on uptake of modern inputs and yields on farms, the effects on prices and intensification measures are lower for farmers in the rural hinterlands of secondary towns compared to big cities.
"When we compare the model prediction with empirical observations, we find evidence that secondary towns influence the variation of teff prices when transportation costs to the primate city increase. The empirical section of this paper further tests how the size of the city and urban proximity affects agricultural intensification. When we compare intensification between farmers close to secondary towns and farmers close to Addis Ababa, we find that secondary town farmers use less modern inputs and achieve lower yields compared to their counterparts in the rural hinterland of Addis Ababa. Our results therefore show that the location of farmers with respect to cities and the type of cities have strong effects on farmers’ intensification decisions in staple crop production.
Our findings have potentially important implications for a broader welfare perspective. Our conceptual analysis combined with the empirical results suggests that there may be a trade-off in terms of the impact of the nature of urbanization (one primate city versus multiple secondary towns) on agricultural development. The first effect is the positive influence from secondary towns. If secondary towns are absent in the rural economic space, and there is only the primate city where all urban consumers are located, our model predicts that at locations relatively remote from the primate city, it becomes unprofitable to produce agricultural outputs for the urban market. Hence, these farmers are excluded from the central market in the primate city and are most likely to remain subsistence-oriented farmers. In the case where the urban population is not concentrated in one primate city but partially distributed in secondary towns, the farmers who were initially located too far from the primate city to produce for its market are now influenced by the urban demand in the secondary towns. As a consequence, these farmers will start producing for these urban markets and become responsive to market signals from them. Moreover, improved access to modern inputs could allow them to intensify their agricultural production. Hence, these non-linearities indicate that there is increased economic activity in the rural hinterlands because of the influence of secondary towns.
The second effect that we empirically observe in Ethiopia is that the impact of the secondary towns is smaller than that of the larger capital city. Hence, while more farmers may benefit from urban spillover effects on agricultural prices and access to modern inputs due to their proximity to secondary towns, the size of the benefits they realize may be smaller."
Vandercasteelen, Joachim; Beyene, Seneshaw Tambru; Minten, Bart; and Swinnen, Johan. 2018. Big cities, small towns, and poor farmers: Evidence from Ethiopia. World Development 106(June 2018): 393-406. https://doi.org/10.1016/j.worlddev.2018.03.006
This research was conducted as part of the CGIAR Research Program on Policies, Institutions, and Markets (PIM), led by IFPRI. The authors acknowledge the support for this research by the Ethiopia Strategy Support Program (ESSP). ESSP is managed by the International Food Policy Research Institute (IFPRI), is implemented in partnership with the Ethiopian Development Research Institute (EDRI), and is financially supported by the United States Agency for International Development (USAID), the Department for International Development (DFID) of the government of the United Kingdom and the European Union (EU).