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How Are the Benefits of Agricultural Development Currently Distributed: Is it the Drip Effect or the Funnel Effect?

How Are the Benefits of Agricultural Development Currently Distributed: Is it the Drip Effect or the Funnel Effect?

By Lucio Muñoz

The objectives of this document are: to introduce a model of agricultural development which is controlled by the effect that the author calls the funnel effect; highlight that under conditions of inequality, the funnel effect pushes the benefits of agricultural development towards those who have a better economic position; and emphasize that only in the absence of the funnel effect could the trickle-down effect be expected to work as historically assumed and thus provide benefits to all participants including the poor.

Summary


It is always assumed that the impacts of agricultural development are distributed among individuals, groups and countries through the so-called trickle-down effect, the process that ensures that the benefits of agricultural development are shared top-down by all participants.

However, despite constant improvements in agricultural technology and knowledge in the last 50 years, this expectation has not materialized. Instead, the evidence indicates that there is a dual process at work: Economic agents have benefited a lot (More wealth was generated and hoarded by a wealthy minority) and social and environmental agents have suffered a lot (Poverty levels and environmental degradation have increased). And it is this lack of connection between the historical expectation of the trickle-down effect and the current impacts of development at the local level that makes the question relevant: If it is not the trickle-down effect that is in action, then how have they been and how are the effects? distributed agricultural development impacts?

The objectives of this document are: to introduce a model of agricultural development which is controlled by the effect that the author calls the funnel effect; highlight that under conditions of inequality, the funnel effect pushes the benefits of agricultural development towards those who have a better economic position; and emphasize that only in the absence of the funnel effect could the trickle-down effect be expected to work as historically assumed and thus provide benefits to all participants including the poor.

Introduction

Theory versus practice behind the traditional agricultural development model

In general, it can be said that the efficient functioning of the traditional model of agricultural economy rests on three fundamental principles: the assumption of equality, the assumption of the trickle-down effect, and the assumption of improving the welfare of the majority. Based on the experience of agricultural development in the last 50 years a short review of the theoretical and practical bases behind each of these fundamental principles is presented below:

a) Theory versus practice: the assumption of equality

In theory, it is assumed that economies operate in environments where equal access exists and that economies are organized in ways that allow resources (income, land, and other natural assets), inputs (capital, labor, and technology) , and markets (local, regional, national, and global) are used fairly and efficiently. In other words, it is assumed that everyone has an equal right of access, and therefore who controls access in these economies is not important.

In practice, it is a fact that access to resources, inputs, and markets was and continues to be uneven. Addison and Cornia (2001) indicate that in the last 20 years inequality has continued to increase, negatively affecting efforts to reduce poverty.

Therefore, the agricultural development model was and is being implemented in an environment of deep inequality. Under inequalities, contrary to expectations under equalities, who controls access is very important since the benefits will tend to accumulate in those hands. That makes inequality one of the key factors between growth expectations and poverty. For example, Nissanke and Thorbecke (2007) highlight that one of the connections between globalization and poverty is inequality. It is known that the higher the inequality, the lower the effectiveness of higher growth in terms of reducing poverty (Cord 2007).

b) Theory versus practice: the trickle down assumption

The equality assumption is tied to the trickle-down assumption through theory. The assumption of equality ensures the operation of the assumption of the trickle-down effect, which refers to the expectations that the benefits resulting from the implementation of the agricultural development model and new agricultural technologies will trickle down and thus benefit large segments of the population. population from top to bottom. The expectation within the traditional economic model that growth alone will sooner or later lead to an improvement in the economic positions of all the rich and poor is well known (Dohlman and Soderback 2007). Toussaint (2006) describes the trickle-down effect as a simple metaphor through which development institutions such as the World Bank hope that the economic position of the poor will improve when the economic position of the rich improves further.

In practice, it is well documented that the trickle-down effect has distributed benefits unevenly since it has been implemented in an environment of inequalities; and therefore the expectation of equality associated with the trickle-down effect has not worked. It is a fact, some have benefited more than others with this trickle-down effect, confirming the proposition that under inequalities those who control access currently benefit more from the trickle-down effect.

Nissanke and Thorbecke (2007) highlight that the expectation that globalization would lead to improvements in terms of poverty reduction and income distribution has not materialized; and that based on the way in which the globalization process has worked to date, the concern that this process has had negative impacts in terms of poverty and income distribution cannot be ignored. The trickle-down effect has not worked as expected in developed countries either. Lewis (2007) highlights that in the UK and in all other developed countries including the United States, income inequalities have worsened in the last 25 years.

Frank (2007) observes that the trickle-down theory continues to be used today despite the fact that its practical and theoretical weaknesses are well documented. It's no surprise then that countries like India and China are trying to move away from trickle-down assumptions and looking for more direct ways to bridge the inequalities between rich and poor through massive investments in education, health, employment, and development programs. (Crane 2007).

c) Theory versus practice: the assumption of improving the welfare of the majority

The trickle down assumption is also linked to the expectation of benefiting the majority of the population by theory. It is assumed that the trickle-down effect is the best distributive mechanism within the traditional market to ensure that the benefits reach all social groups. In other words, improving the well-being of the majority through a fair distribution of economic growth is the desired result of the trickle-down effect and therefore of the agricultural development model. In this way, as economic growth materializes, a growth in the welfare of the majority is expected since there is the expectation of seeing improvements in social welfare. In summary, it is assumed that the agricultural economy model is implemented in an environment where equal access exists and, therefore, the benefits of economic growth are distributed fairly through the trickle-down effect, thus ensuring continuous improvements in welfare. of the majority or of society as a whole.

In practice, the evidence shows that the rich have gotten richer (the powerful are more powerful) and the poor are getting poorer (the weak are weaker). And it is a fact, few are those who control access to resources, inputs, and markets; and those few are the ones who get the strongest drip effect. The fact that equality issues in terms of rich and poor have worsened over the years and that this imbalance became relevant when it was included in the Millennium Development Goals (MDG) was highlighted by Wolfensohn (2004). That is, reality shows that the traditional model of agricultural economy fits well only as a means to satisfy the welfare of the minority, not the welfare of the majority as is theoretically assumed. WB (2000) emphasizes that there is a feeling that globalization is negatively affecting inequality that works against the poor, which is perhaps motivated by the fact that the number of poor in absolute terms has not decreased.

On the other hand, implementing the model of agricultural development under inequality has led to a tri-modal form of growth: growth in affluence, growth in poverty, and growth in environmental degradation. In other words, economic growth has materialized, the well-being of the few or the richest segments of society has grown, at the same time that there has been no growth in the well-being of the poor, contrary to initial expectations. For example, expectations that the continuous and incremental improvements in agricultural development technologies that have occurred over the past 50 years would benefit everyone in the agricultural sector equitably have not materialized at the same time as poverty and poverty. hunger have increased.

WB (2000) emphasizes that the biggest challenge globalization now has continues to be poverty reduction. And this situation seems to be currently behind the International Assessment of Agricultural Science and Technology (IAASTD 2004), a process that is aimed at re-evaluating the way in which the traditional model of agricultural development has worked under the influence of the trickle-down effect; and suggesting possible consistent solutions, among other things, with more direct steps towards poverty reduction. The need to improve the role of agricultural productivity in reducing poverty appears to continue to gain momentum now that it is recognized that one of the best means of achieving the Millennium Development Goals (MDGs) is in fact through making productivity and more poor-friendly agricultural profitability (WB 2006).

The Lesson: Under inequality, the equity assumption associated with the trickle-down effect fails to create a distributive system in favor of dominant or well-established minorities. And this is consistent with the point of view that programs aimed at reducing poverty should not be expected to be effective when inequality in access to income and assets is very prevalent and worsening since under those conditions the benefits will accumulate in a minority (Addison and Cornia 2001).

The need to match growth and poverty reduction to circumvent the false expectations of the trickle-down effect seems to be gaining steam at the moment. For example, Dohlman and Soderback (2007) exalt that the Poverty Reduction Network (POVNET / OECD) is now recommending and promoting a pro-poor, pro-growth strategy, aimed at having immediate and sustained effects on reducing poverty. poverty. And OECD (2006) indicates in a policy statement that pro-poor growth is necessary to quickly solve poverty issues in a sustained way.

This promotional push based on pro-poor growth can work better than the previous pro-growth strategy only if it is paired with strong efforts aimed at reducing existing inequalities since it was mentioned earlier that increases in inequalities result in increases in benefits for those who are economically better. This pairing of pro-poor growth and reduction of inequalities is very important today to ensure a sustained and growing poverty reduction since two of the most important predictions made in the 2007 Report on the Global Economy are: a) more global growth is in progress. path; and b) more wealth disparities are on the way (Stuart 2007). The IMF (2007), despite recent financial instability, also expects strong global economic growth in 2007 and 2008.

The need to explain the gap between theory-practice

If the equitable trickle effect is not working, then what explains the theory-practice gap in terms of benefit sharing? This document highlights what the author calls the funnel effect, not the trickle-down effect, the unjust mechanism that explains the constantly growing gap between the rich-poor.

The objectives of this document

The objectives of this document are: to introduce a model of agricultural development controlled by the effect that the author calls the funnel effect; highlight that under conditions of inequality, the funnel effect pushes the benefits of agricultural development towards those who have a better economic position; and to emphasize that only in the absence of the funnel effect could the trickle-down effect be expected to function as historically assumed and thus provide benefits to all participants including the poor.

Terminology

The terminology used to present the ideas in this document is listed below.

Table 1

E = Equalitye = Inequality
B = Agricultural benefitsS = Agricultural technology
G = Many peopleg = Few people
R = The richP = The poor
A = Model under the funnel effecta = Model without the funnel effect
L = Equal access to resources existsl = Unequal access to resources exists
M = Equal access to markets existsm = Unequal access to markets exists
A1 = Type 1 funnel effectA2 = Type 2 funnel effect
A3 = Funnel effect type 3T = drip effect

Methodology

First, some operational rules linked to the distribution of benefits from agricultural development under conditions of equality and inequality are listed to highlight the structure of what the author calls the Bowl Effect and the Funnel Effect. Second, a general model of agricultural development based on the Funnel effect is introduced, controlled by unequal access to resources and / or markets. Third, this general model is used to highlight partial, total and neutral models of the Funnel Effect and their general characteristics. Fourth, it is emphasized that the expectations associated with the drip effect model are the same as the expectations associated with the neutral funnel effect model and with the bowl effect model. Fifth, it is indicated that the expectations of the drip effect model and therefore those of the bowl effect model are totally opposite to the expectations associated with the total funnel effect model. And finally some relevant conclusions are mentioned.

Operational rules

i) Proliferating benefits (B) of agricultural technologies (S) under equality (E)

It is expected that the benefits under equality [B (E)] resulting from the implementation of better agricultural technologies (S) should benefit all those who enjoy this condition of equality (G).

S
B (E) —————–> G

For example, when there is equal access to resources (E) such as land, everything else remaining the same, benefits (B) from agricultural technological progress (S) will be shared by all participants (G) since they would all be able to implement the agricultural innovations whether they are provided free or for a fee.

This leads to what the author calls the Bowl Effect as indicated in Figure 1 below:


Figure 1 indicates that under equality (E), benefits (B) from agricultural technologies (S) reach everyone in the bowl; This figure links benefits (B) with the notion of equality (E) in terms of sharing. Note that the expectation of the bowl effect is consistent with the expectation associated with the trickle-down effect mentioned in the introduction, meaning that there are benefits for everyone to share.

ii) Proliferating benefits (B) from agricultural technologies (S) under inequality (e)

It is expected that the Benefits under inequality [B (e)] resulting from the implementation of improvements in agricultural technologies (S) will benefit the few enjoying that condition of inequality (g).

S
B (e) —————–> g

For example, when there is inequality in access to resources (e) such as land, everything else remaining constant, the benefits (B) of agricultural technological progress (S) will reach those, few people (g), with access to the land as only they would be able to implement agricultural innovations whether provided for free or at a cost. Those who do not have access to land cannot implement the technologies even when they are free.

This tendency of benefits (B) to reach for the most part those best established (R) when agricultural development programs are implemented under unequal access to resources (income, land and other natural resources), unequal access to inputs (hand of work, capital, and new technologies), and unequal access to markets (local, regional, and global) is what the author calls the Funnel effect or Cone effect.

The concept of the funnel effect can be clearly seen in Figure 2 below:


Note that under inequality (e), the Bowl in Figure 1 becomes a Funnel or Cone in Figure 2.

That is, Figure 2 indicates that under inequality (e) we can conceptualize a system with a funnel or cone shape, where the rich (R) are located at a wide and shallow peak; and the poor (P) are in the lower part which is increasingly deeper and narrower. Figure 2 links benefits (B) with inequality (e) in terms of sharing. Note that when the benefits (B) of agricultural development are poured into a funnel or cone, most of them are absorbed at the top and very little or nothing reaches the bottom.

The agricultural development model based on the Funnel effect (A)

There is an agricultural development model with a funnel effect (A) when there is inequality in access to resources (l) or when there is unequal access to markets (m) or when there are both unequal access to resources (l) and markets (m) to the same time, which can be expressed as follows:

1) A = l + m

There are three possible funnel effect models consistent with formula 1 above

i) Funnel effect under unequal access to resources

The first possibility of the Funnel effect is found when agricultural development (A) is implemented in an environment where there is profound inequality in access to resources (l) and where there is equality in access to markets (M) at the same time, which is you can indicate as below:

2) A1 = lM

In this A1 model, only those who have access to resources will receive benefits from the improvements in agricultural technologies since only they will be able to implement them and be able to bring additional production and / or better products to the market.

For example, it is hoped that those who own land (usually a minority) will be able to implement technological improvements, whether they are provided for a cost or free; and it is to be expected that those who do not have access to land (usually a majority) will not be able to implement the new technologies even when they are offered for free. In other words, model A1 is a partial funnel effect model which is influenced by inequalities in access to resources.

ii) Funnel effect under unequal access to markets

The second possibility of the Funnel effect occurs when agricultural development (A) is implemented in an environment where there is equality in access to resources (L) and where there is deep inequality in access to markets (m) at the same time, which is indicated down:

3) A2 = Lm

According to the A2 model, only those resource owners with access to markets will benefit from improvements in agricultural technologies (usually a minority) since only they will have an incentive to implement them, whether they are provided free or at a cost because only they they would be able to sell increases in production and / or better products in those markets. In other words, model A2 is another type of partial funnel effect model, but in this case it is influenced by inequalities in market access.

iii) Funnel effect under unequal access to resources and markets

The third possibility of the funnel effect occurs when agricultural development (A) is implemented in an environment where there is inequality in access to resources (l) and where there is inequality in access to markets (m) at the same time, which the author calls “The total funnel effect model”, as indicated below:

4) A3 = lm

Consistent with the A3 model, only those with access to resources (usually a minority) and with access to markets (usually a minority) at the same time will benefit from improvements in agricultural technologies since only they will have an incentive to implement them, whether are provided free or for a cost because only they would be able to sell increased production and / or better products in those markets. In other words, the A3 model is a total funnel effect model since it is influenced by inequalities in access to resources and markets at the same time.

iv) Agricultural development without funnel effect (a)

According to formula 1 above, there is agricultural development without funnel effect (a) but only when there is equality in access to resources (L) and equality in access to markets (M) at the same time. The author calls this situation, the agricultural development model with the neutral Funnel effect, as indicated below:

5) a = LM

In the case of model “a” to formula 5, all those with access to resources and markets at the same time would benefit from improvements in agricultural technologies since all of them would be able to have access to markets to sell increases in production and / or better products. Note that the expectation expressed through model "a" is consistent with the expectation of the trickle-down effect model (T); and that is presented below:

6) T = a = LM

Formula 6 shows that the expectations of the trickle-down effect model (T) are the same as the expectations of the agricultural development model with the neutral Funnel effect (a) since both require the existence of equality in access to resources (L) and access to markets (M) at the same time in order to provide agricultural improvement benefits to all participants.

It should also be noted that the implications of formula 6 are the same as the implications of the bowl effect highlighted in Figure 1 above since both need equal conditions in access to resources (L) and in access to markets (M) to benefit all participants, which is expressed below:

7) T = a = LM = The Bowl Effect = Bowl Effect

Finally, formula 7 helps to clearly appreciate that under conditions of inequality the expectations of the drip effect (T) and those of the bowl effect cannot be achieved since both models clearly require the existence of equality in access to resources (L) and equal access to markets (M) at the same time to be able to function as expected.

Specific conclusions


First, it was highlighted that under conditions of equality (E), the distribution of the benefits of agricultural development would be consistent with the expectations of the bowl effect presented in Figure 1. Second, it was emphasized that under conditions of inequality (e), the distribution of the benefits of agricultural development would be consistent with the expectations of the partial and total funnel effect models mentioned. Third, it was indicated that the expectations of the trickle-down effect model (T) are the same as the expectations associated with the agricultural development model with a neutral funnel effect (a), the need to have equal access to resources (L) and markets (M) at the same time. Fourth, it was mentioned that both expectations of the trickle model (T) and the neutral funnel effect model (a) are the same as the expectations of the bowl effect model described in Figure 1.

And finally, it was highlighted that if we really want to see that the expectations of the trickle-down effect work, then we must ensure that there is equality in access to resources and equality in access to markets at the same time when agricultural development policies are implemented.

General conclusions

It was indicated that under conditions of equality (E), the agricultural development model would leak as expected benefiting all participants, but under conditions of inequality the assumption of the trickle-down effect simply does not work. In other words, it is a fact that agricultural development policies are implemented in conditions of profound inequality in access to resources and access to markets at the same time; therefore, it is impossible to expect that the expectations of the trickle-down effect will materialize under these conditions and benefit all participants. As a result, the implementation of the agricultural development model under any type of Funnel effect will create a distributive mechanism that favors those who are better established.

And this explains why despite constant improvements in agricultural technologies over the years that have led to more growth, poverty levels and environmental degradation have been increasing; and why the Funnel effect provides a better explanation for the now well known unequal process of agricultural benefit distribution. Finally, only by addressing inequalities in access to resources and markets at the same time can we create the conditions where agricultural growth will benefit everyone, including the poor.

Lucio Munoz - Comparative Qualitative Researcher / Consultant, Vancouver, BC, Canada

References

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Cord, Louise, 2007. Overview, In: Delivering on the Promise of Pro-Poor Growth: Insights and Lessons from Country Experiences, The World Bank, Washington DC, USA.

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Dohlman E. and M. Soderback, 2007. Economic Growth Versus Poverty Reduction: A Hollow Debate ?, OECD Observer magazine, April, Paris, France.

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