Agricultural development is crucial in developing countries, and particularly in the poorest countries where it accounts for large shares of employment and income and whose poverty is due simply to having a large share of the workforce in low-productivity agriculture. Raising productivity in agriculture is critically important for development, as is smoothly moving workers out of agriculture into more productive employment in other sectors. Raising agricultural productivity helps both to raise incomes and to reduce poverty-both by raising the incomes of poor people working in agriculture and by lowering the prices of foods that make up a disproportionately large share of the expenditures of poor people. In small and open economies, the in-crease in profitability of agriculture following improvements in productivity might tend to retain or even attract workers into agriculture. By contrast, at a global level, or at national level when policy focusses on self-sufficiency, improvements in agricultural productivity will free up labor for employment in other sectors. Incomes are generally much higher in non-agricultural work in developing countries-more than double those in agriculture after careful adjustment for key differences. This raises the possibility of a double dividend from structural transformation as workers move into higher-productivity activities. A key question for development policy is whether it is enough to simply evaluate the gains from higher productivity within agriculture, or whether potential benefits from structural change be included as well. This paper examines the arguments on this question. It concludes that these dividends may be substantial-but whether they are or not depends on the source of the initial differences in productivity and on the direction of movement when agricultural productivity rises. If it results from policy barriers such as restrictions on the transfer of farmland or requirements for residence permits in urban areas, there are likely to be substantial welfare gains when labor moves out of agriculture. They may also be substantial if urban wages are artificially high and attract substantial numbers of job-waiters into unemployment. However, these gains may be illusory if the income gaps arise primarily from differences in skills or from reluctance to move created by asset fixity.

The book highlights proceedings from the Berlin 2008: Agriculture and Development conference held in preparation for the World Development Report 2008.

The world's demand for food is expected to double within the next 50 years, while the natural resources that sustain agriculture will become increasingly scarce, degraded, and vulnerable to the effects of climate change. In many poor countries, agriculture accounts for at least 40 percent of GDP and 80 percent of employment. At the same time, about 70 percent of the world's poor live in rural areas and most depend on agriculture for their livelihoods. 'World Development Report 2008' seeks to assess where, when, and how agriculture can be an effective instrument for economic development, especially development that favors the poor. It examines several broad questions: How has agriculture changed in developing countries in the past 20 years? What are the important new challenges and opportunities for agriculture? Which new sources of agricultural growth can be captured cost effectively in particular in poor countries with large agricultural sectors as in Africa? How can agricultural growth be made more effective for poverty reduction? How can governments facilitate the transition of large populations out of agriculture, without simply transferring the burden of rural poverty to urban areas? How can the natural resource endowment for agriculture be protected? How can agriculture's negative environmental effects be contained? This year's report marks the 30th year the World Bank has been publishing the 'World Development Report'.

The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme aims to provide income support to farmers to facilitate timely access to inputs by easing their liquidity needs. This study, based on 1,406 farmers of Uttar Pradesh and using a binary choice model, examines the scheme’s targeting accuracy and the correlates of farmers’ spending patterns. Triple difference with matching estimators are used to identify the differential impact of PM-KISAN on Krishi Vigyan Kendras (farm science centers, or KVKs) beneficiaries. Results show that PM-KISAN reached to one-third of all the farmers in the first three months of its implementation. Moreover, the study finds no selection bias based on social, economic and agricultural characteristics. The scheme has significantly helped those who are relatively more dependent on agriculture and have poor access to credit. Moreover, scheme has significantly stimulated the KVK ’s impact on the adoption of modern cultivars.

The relative contribution of a sector to poverty reduction is shown to depend on its direct and indirect growth effects as well as its participation effect. The paper assesses how these effects compare between agriculture and non-agriculture by reviewing the literature and by analyzing cross-country national accounts and poverty data from household surveys. Special attention is given to Sub-Saharan Africa. While the direct growth effect of agriculture on poverty reduction is likely to be smaller than that of non-agriculture (though not because of inherently inferior productivity growth), the indirect growth effect of agriculture (through its linkages with nonagriculture) appears substantial and at least as large as the reverse feedback effect. The poor participate much more in growth in the agricultural sector, especially in low-income countries, resulting in much larger poverty reduction impact. Together, these findings support the overall premise that enhancing agricultural productivity is the critical entry-point in designing effective poverty reduction strategies, including in Sub-Saharan Africa. Yet, to maximize the poverty reducing effects, the right agricultural technology and investments must be pursued, underscoring the need for much more country specific analysis of the structure and institutional organization of the rural economy in designing poverty reduction strategies.

A first step in evaluating the effects of agricultural investments in developing countries to recognize that policy makers will almost certainly have multiple objectives. Even policy makers like those at the Millennium Challenge Corporation, with a strong focus on ensuring that interventions contribute to growth, also have a keen interest in poverty reduction and other goals such as enhancing gender equity. This presence of multiple goals has profound impacts on the choice of policies and mean it is likely that more than one policy instrument will be needed to best achieve those goals. Once the goals of policy have been identified, the next step is to identify possible policy instruments to help in achieving these goals. These potential policy instruments will likely include some policy reforms like adjustments to trade policies that are relatively easy to implement, whose impacts are relatively easy to analyze and whose implications for fiscal revenues may be slight. They may also include re-forms to the ways that policies are identified and implemented, such as moves from centralized policy making to community driven development, designed to align policies more strongly with needs in the communities affected. They are also likely to include investment projects with substantial revenue requirements that seek to rectify market failures in areas such as the provision of public goods or the internalization of externalities. Constraints Analyses are an important part of the MCC approach to identifying and evaluating interventions using the Hausmann, Rodrik and Velasco growth diagnostic approach (HRV). This seeks to identify areas in which substantial progress can be made at limited cost by identifying key omissions in cur-rent policies. Their famous, and useful, analogy to a barrel with a short stave whose lengthening can increase the water level in the barrel at minimum cost helps grasp the essence of this approach. It deals with situations where inefficiencies in past policy making, and/or changes in circumstances mean that disproportionately large benefits are obtainable at low cost.

This analysis explores the relationship between agricultural R&D investments and rural poverty reduction, and the prevalence of undernourishment in sub-Saharan Africa (SSA). It uses a panel data set of internationally comparable poverty dis-aggregated by urban and rural areas, country level undernourishment, and ASTI data on R&D investments and derived indicators. The study uses agricultural R&D knowledge stocks (KS) to account for the lagged effects of research through depreciation and gestation period of investments, and applies causal mediation analysis to assess the impact of KS on poverty and hunger and measure the relative contribution of KS-induced agricultural productivity growth on those outcomes. Evidence suggests that, while SSA growth in KS has been relatively slow, it helped reduce rural poverty and undernourishment – the percentage point reduction in rural extreme and moderate poverty of a 1% annual increase in KS is 0.218 and 0.146 percentage points per year, respectively. Mediation analysis indicates that a fifth of the KS effect on extreme rural poverty, and a quarter of the KS effect on moderate rural poverty, can be attributed to KS driven gains in agricultural labor productivity. Likewise, KS growth reduces undernourishment – a 1% annual increase in KS leads to a drop of 0.132 percentage points per year in the prevalence of undernourishment, with about 40% of that effect mediated through gains in agricultural land productivity. These results indicate that KS supports poverty and hunger reduction through benefits on-farm and beyond it. They also suggest that there is room for strengthening the role of R&D KS productivity enhancing innovations. Given the current low levels of investments in R&D and resulting KS, increasing its levels will be critical, but that alone is not sufficient. Policy makers will have to rethink the way the innovations from R&D get scaled up and pay attention to the necessary complementary policies and investments that enable a sustainable pathway leading to greater productivity growth and development impacts.