Rising agricultural productivity has driven improvements in living standards for millennia. Today, redoubling that effort in developing countries is critical to reducing extreme poverty, ensuring food security for an increasing global population, and adapting to changes in climate. This volume presents fresh analysis on global trends and sources of productivity growth in agriculture and offers new perspectives on the drivers of that growth. It argues that gains from the reallocation of land and labor are not as promising as believed, so policy needs to focus more on the generation and dissemination of new technologies, which requires stepping up national research efforts. Y et, in many of the poorest nations, a serious research spending gap has emerged precisely at the time when the challenges faced by agriculture are intensifying. The book focuses on how this problem can be redressed in the public sector, as well as on reforms aimed at mobilizing new private sector actors and value chains, particularly creating a better enabling environment, reforming trade regulations, introducing new products, and strengthening intellectual property rights. On the demand side, the book examines what recent research reveals about policies to reduce the barriers impeding smallholder farmers from adopting new technologies. Harvesting Prosperity is the fourth volume of the World Bank Productivity Project, which seeks to bring frontier thinking on the measurement and determinants of productivity to global policy makers. “As rightly argued by the authors, growth in agricultural productivity is the essential instrument to promote development in low-income agriculture-based countries. Achieving this requires research and development, upgrading of universities, reinforcement of farmer capacities, removal of constraints to adoption, and the development of inclusive value chains with interlinked contracts. As important, such efforts also need to be placed within a context of comprehensive agricultural, rural, and structural transformations. However, in many countries implementation of the requisite policies has been lagging. This book, with contributions from many top experts in the field, provides the most up-to-date presentation of this argument and explains in detail how to successfully put its ideas into practice. Governments, the private sector, and civil society organizations need to study it carefully to turn the promise of agriculture for development into a reality.” Alain de Janvry and Elisabeth Sadoulet Professors of the Graduate School, University of California at Berkeley Harvesting Prosperity Keith Fuglie, Madhur Gautam, Aparajita Goyal, and William F . Maloney Technology and Productivity Growth in Agriculture CONFERENCE EDITION SKU 33376Harvesting Prosperity CONFERENCE EDITIONHarvesting Prosperity Technology and Productivity Growth in Agriculture Keith Fuglie, Madhur Gautam, Aparajita Goyal, and William F. Maloney CONFERENCE EDITIONThe text of this conference edition is a work in progress for the forthcoming book, Harvesting Prosperity: Technology and Productivity Growth in Agriculture, doi: 10.1596/978-1-4648-1393-1. A PDF of the final book, once published, will be available at openknowledge.worldbank/ and documents. worldbank/, and print copies can be ordered at amazon. Please use the final version of the book for citation, reproduction and adaptation purposes. © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 T elephone: 202-473-1000; Internet: worldbank Some rights reserved This work is a product of the staff of The World Bank with external contributions. 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Cover art: Remedios V aro, Planta Insumisa (Unsubmissive Plant) (1961). Used with permission of the artists estate. Further permission required for reuse. Cover design: Bill Pragluski, Critical Stages, LLC.v Contents Preface .xiii Acknowledgments . xv Abbreviations .xvii Executive Summary: The Elusive Promise of Productivity .xix 1. Sources of Growth in Agriculture .1 Improving Agricultural Productivity: Traversing the Last Mile toward Reducing Extreme Poverty .1 Poverty Reduction, Productivity Growth, and Economic Transformation . 2 Trends in Land and Labor Productivity .7 Conceptualizing Sources of Agricultural Growth .8 What Has Driven Agricultural Output Growth? The Increasing Importance of TFP .11 What Will Accelerate Agricultural TFP? The Plan of the Book .17 Annex 1A. Issues in Measuring Agricultural Productivity .24 Notes .37 References .38 2. Misallocation and Productivity Growth .43 The Potential for Productivity Gains from Reallocation .43 Insights on Farm Size and Productivity .44 Labor Productivity and Structural Transformation .55 Annex 2A. Microdata Sources for Measuring Labor Productivity in China and India .82 China .82 India .83 Annex 2B. Distribution of Workdays by Farm and Nonfarm Activities in a Typical Month for an Average Adult Worker in India .84 Annex 2C. Labor Productivity Differences by Farm Size .85 Annex 2D. Labor Productivity Differences by Education Level .86vi Contents Annex 2E. Drivers of Wage Differentials between Farm and Nonfarm Work in China .87 Notes .88 References .88 3. Investing in Innovation .95 Agriculture Innovation Policy in a Changing Global Context .95 Agriculture R&D Spending Worldwide: Increasing but Uneven .98 Revitalizing Public Research .105 Providing Incentives for Private Innovation .114 Concluding Remarks .131 Annex 3A. Market Liberalization in Africas Maize Seed Industry .133 Annex 3B. Do Plant Breeders Rights Stimulate Investment in Crop Improvement? .135 Annex 3C. Herbicide Demand and Regional Harmonization of Regulations in Africa .137 Notes .139 References .140 4. Improving the Enabling Environment for Technology Adoption .147 Removing Constraints and Adopting Policies to Promote Diffusion of T echnology .147 The T echnology Adoption Puzzle.148 Removing Policy Bias against Agriculture .151 Closing Education Gaps.153 Securing Land T enure Rights for Smallholders .156 Providing Information Services .157 Helping Farmers Manage Risk .164 Improving Access to Financial Services .169 Linking Farmers to Markets .174 Concluding Remarks .178 Notes .180 References .180 5. The Challenge of Agricultural Productivity Policy and the Promise of Modern Value Chains .187 The Agriculture Productivity and Innovation System .187 The Productivity Policy Dilemma in Agriculture and the Modern V alue Chain .191Contents vii The Emergence of High-Value Markets .195 Value Chains and Agricultural Productivity: Some Conceptual Issues . 198 Models of Value Chain Innovations and Organization.205 The Impact of Value Chain Transformations on Productivity .208 Cultivating V alue Chains .214 Concluding Remarks .222 Notes .224 References .225 Boxes 1.1 Decomposing Sources of Agricultural Growth .9 1.2 New Data for Decomposing Agricultural Growth and Measuring T otal Factor Productivity .12 1.3 Research, T echnological Capabilities, and Knowledge Diffusion: Key to the Transformation of US Agriculture .21 2.1 Analytically Challenged? The Mechanics of the Agricultural Productivity Gap .59 2.2 High-Quality Microdata Sets Provide New Insights on Rural Labor .63 3.1 R&D Capital, R&D Elasticities, and the Rate of Return to Research .104 3.2 The Expansion of Animal Protein Industries in Nigeria and Bangladesh .118 3.3 Policies and Innovation in Chinas Agricultural Machinery Industry .124 4.1 Farmer Adoption of Flood-T olerant Rice