Department of Agricultural, Food, and Resource Economics Food Security Group

IDWP 66. T.S. Jayne, James D. Shaffer, John M. Staatz, and Thomas Reardon. 1997. 39 pp. Improving the Impact of Market Reform on Agricultural Productivity in Africa: How Institutional Design Makes a Difference

EXECUTIVE SUMMARY:
In Africa since 1980, more than 30 countries have undertaken agricultural policy reforms as part
of broader structural adjustment programs. Many advocates of market reform have argued that
the relaxation of controls on private trade and investment would raise productivity based on the
premises that (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.

However, the results of the reform programs have been mixed and frequently inconsistent with the
expected increases in productivity. Using national-level data from Burkina Faso, Ethiopia, Kenya,
Mali, Senegal, Zambia, and Zimbabwe, we found that partial measures of agricultural labor
productivity increased during the periods of sectoral reform in only three of seven cases; partial
measures of agricultural land productivity increased in four of seven cases. These findings are
consistent with micro-level research findings indicating that in spite of major benefits achieved
through the elimination of former policy-related barriers to private investment in the food system,
there remain major institutional constraints in the prevailing economic-legal-contractual systems
of exchange that retard the potential for future development.

It is now being realized that the sectoral reform prescriptions have, in many cases, been based
upon only superficial knowledge of the prevailing economic institutions and how they affect
economic outcomes in particular economies. There is also an emerging general consensus that
future productivity growth within the evolving market economies in Africa will require closer
attention to the institutional details of the system — i.e., going beyond generalizations that
property rights, market rules, and exchange mechanisms need to be defined and worked out, to
actually conducting pragmatic applied research on the specific kinds of property rights, rules, and
exchange arrangements that would most contribute to economic development under particular
country circumstances. This implies a need for procedures of identifying and working out specific
property rights, commercial codes, market rules, and exchange arrangements most likely to
contribute to improved economic performance, given the values of people and circumstances of
the country.

This paper reviews the emerging empirical record of agricultural marketing policy reform and
agricultural productivity, drawing from research on food access and agricultural productivity
supported by USAID’s Africa Bureau on seven countries in West, Eastern, and Southern Africa.
We also examine key factors constraining past and future performance of the food systems in
these countries. The paper concludes by identifying a set of policy issues for further consideration
that would help provide the investment incentives to promote productivity growth for the millions
of low-input semi-subsistence rural households in the region.