Rural Institutions, Agricultural Development, and Pro-Poor Economic Growth

According to conventional wisdom, the ideal form of pro-poor economic development is through investment in agriculturally-led growth. In the early stages of growth, increased production decreases food prices and shifts out the demand for labor. Inasmuch as poor households disproportionately consume food and earn a relatively large share of their income from labor, both mechanisms benefit the poor. Agricultural economists typically recommend a panoply of government interventions to go along with the investments in new technology and infrastructure, including price-supports and stabilization schemes, credit and input subsidies, and crop insurance. The interventionist policy recommendations, however, are based on a variety of misconceptions and misinterpretations about farmer behavior and rural institutions.