Socio economic impact assessment and

agricultural biotechnology innovations: The

Green Revolution and the CGIAR

José Falck-Zepeda
j.falck-zepeda@cgiar.org
Research Fellow
Environment and Production Technology Division
International Food Policy Research Institute (IFPRI)

Presentation made at Washington University - St. Louis, St. Louis, Missouri, April 5, 2007

Tuesday, November 17, 2009

 Content
• The Green Revolution, the CGIAR and IFPRI
• Methodologies for socio-economic impact
assessment
• Biotechnology issues
• Review of studies assessing GM crops

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 The Green Revolution

• Transformation of agriculture during

1940s-1970s that lead to significant
increases in yields
• Firmly based on:
• Agricultural production needs to keep
pace with population growth
• Agricultural sciences philosophy of
maximizing production per unit of land
• Plant breeding developments of the
late 19th early 20th centuries
• Initially focused on a few crops
(Wheat, rice, maize) but has been
expanded

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 The challenge according to FAO
• To feed a population of 9 billion persons by
2050, without allowing for additional imports of
food:
• Africa has to increase its food production roughly
300%; Latin America 80%; and Asia 70%.
• Even the US has to increase food production by 30%
just to supply food for the projected population of 348
million person

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 ―New‖ constraints
• Erosion
• Water and irrigation problems
• Climate change => Global warming
• Soil fertility
• Land being retired due to environmental concerns
• Urbanization
• Consumer concerns about intensive agriculture: Organic,
Fair Trade, Use of growth promoters
• Competition from biofuels production
• Social, philosophical, ethical and religious concerns over
the food production system
• Concerns over globalization and corporate control of
agriculture

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 The Green Revolution: Frame of Mind

• Haiti Can’t- be-saved

• Egypt Can’t-be-saved
• The Gambia Walking Wounded
• Tunisia Should Receive Food
• Libya Walking Wounded
• India Can’t-be-saved
• Pakistan Should Receive Food
- Paul and William Paddock, 1967 book
―Famine 1975!‖

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 The Green Revolution - Genesis

• Term coined by USAID director William Gaud in 1968

• Contrasting explanatory theories about the genesis of
the GR
1. Early 20th Century Progressives view science addressing
productivity issues in agriculture as way to free more labor for
industrial growth and improve the livelihoods of the fewer left
behind in agriculture
2. Perkins (Geopolitics and the Green Revolution: Wheat,
Genes, and the Cold War -1997) PNST –Population National
Security Theory
• Population growth leads to hunger, social unrest and thus
endanger National Security
• Research and institutions funded by Rockefeller
Foundation, Ford Foundation and National governments
• Perkins argues that investments in R&D after WWII are
instruments serving foreign policy

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 Norman Bourlag: Father of the Green
Revolution

• NB joined Rockefeller
Foundation team sent to Mexico
in 1944
• Developed the wheat program
that later became CIMMYT in
1963
• Shuttle breeding
• Incorporate short-stature genes
into wheat
• Increased yield and rust resistance
in wheat
• Mexico:
• 1948 self sufficient wheat producer
• 1965 Net exporter
• Won Nobel Peace Prize in 1970
and World Food Prize
• Genesis of the CGIAR

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How was the Green Revolution possible? An agronomist
perspective…
• Incorporation of a dwarfing genes from natural
populations into wheat and rice
• In maize: more vertical orientation of leaves, reduces self-
shading while allowing planting of narrower rows and thus
increases in densities
• Plants bred to dedicate a larger share of
photosynthesis efforts to grain rather than to stems
and leaves
• Harvest index of older varieties was 20% whereas HYV around
50-55%
• Relatively insensitive to day length – can be planted
in a wider range of latitudes
• Increased responsiveness to fertilizer and water

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 Green Revolution: Successes

• Significant increases in yields and production

• From 1950 to 1992, the world’s grain output rose from 692 million
tons produced on 1.70 billion acres of cropland to 1.9 billion tons on
1.73 billion acres
• India: food production increased from 50 to 205 million tons during
the last 5 decades
• But, barely happened in Sub-Saharan Africa
• Economic output per hectare increases significantly
• 30% increase in cereal and calorie availability per person
• Poverty reductions—some studies show this is attributed to
GR raising farmers incomes

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 Green Revolution: Social and Economic
Criticisms
• Does not address underlying social, cultural, ethnical and
institutional constraints that create vulnerability and thus
affect livelihoods
• Is hunger and food insecurity a question of production or unequal
distribution of resources?
• Increased mechanization affected rural labor employment
• Debt effects and credit institutions necessary
• Technology not scale neutral
• Uneven adoption as larger/wealthier farmers adopted first capturing
larger share of benefits
• Landowner/Landholder displacement
• Dependence on pesticides and fertilizers

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 Green Revolution: Environmental/Ecological
Criticisms
• Loss of agricultural biodiversity, not so clear
effect on wild biodiversity
• Focus on few crops => monocultures
• Increased used of pesticides and the pesticide
treadmill
• Increased use of fertilizers
• Irrigation
• Negative impacts of salinization, damage to soils, and
lowering of water tables
• Need to build dams and irrigation systems

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 Lessons Learned

• Increasing agricultural productivity is necessary but not

sufficient to guarantee food security
• Scale neutral technologies
• Knowledge transfer to/from farmers
• Need to consider agriculture within the social,
political, economic, national/international context
• We can’t continue to propose ―technology-only
solutions‖ to complex problems....nevertheless
technological responses are indeed critical to the
―solution‖
• Learn from mistakes and inexperience to come up
with better alternatives => Policy options,
strategies and outcomes
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 CGIAR Changing Paradigm

Agronomic Sustainable
Paradigm Production Agriculture
• Increase Economics Paradigm
production
Paradigm • Improve and/or
• Maximize maximize livelihoods
• Maximize profit
yields
or net • Reduce vulnerability
• Improve returns...is not
fertilizer and the maximum • Environmental /
water yield ecological
efficiency • Gender
• Collective action

Time
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 CGIAR Research Centers

ICARDA
Agriculture in the dry areas ICRISAT
Aleppo, Syria Semi-arid tropical
IFPRI ® agriculture
Food policy BIOVERSITY Patancheru, India
Washington, D.C., USA Agricultural biodiversity
Rome, Italy
WARDA
CIMMYT Rice in West Africa WorldFish
Bouaké, Côte d’Ivoire Penang, Malaysia
Maize and wheat
Mexico City, Mexico

CIAT IRRI
Tropical agriculture
Rice
Cali, Colombia
Los Baños, Philippines

CIP IITA ICRAF IWMI CIFOR

Roots and tubers Tropical agriculture Agroforestry Water resources Forestry
Lima, Peru Ibadan, Nigeria Colombo, Sri Lanka Bogor, Indonesia
ILRI
Livestock
Nairobi,Kenya

IFPRI® is one of 15 research centers supported by the Consultative Group on

International Agricultural Research (CGIAR).
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 What does IFPRI do?
• Provide policy solutions that
achieve a world free of hunger
and malnutrition
• Strategy
• Global food system functioning,
• Global and national food system
governance,
• Food system innovations
• Divided into thematic and
organizational divisions

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 IFPRI Divisions
• Environment and Production
Technology
• Food, Nutrition and
Consumption
• Markets, Trade and
Institutions Development
• Development Strategy and
Governance
• ISNAR
• Communications

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 How do we work?

• Extensive field work

• Multi-disciplinary Initiative
• Global benefits
• Generizeable results
• Research excellence ―state
of the art‖
• Results communicated
through different media to
obtain results
• Capacity strengthening and
training
• Creation of international
public goods

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 Some examples of IFPRI’s research
• Assessment of potential impact of Bt Cotton in West Africa: Benin, Burkina
Faso, Mali, Senegal and Togo
• Seed Systems – markets and varietal diversity
• Mali - Case of Pearl Millet and Sorghum
• India - case of minor millets in Kolli Hills and Dharmapuri Plains
• Biotechnology R&D capacity and Biofuels in Latin America
• Best Practices: Assessing social and economic impact of transgenic crops in
Bolivia, Honduras, The Philippines and Colombia
• Assessment of the programs PROGRESA in Mexico and the PRAF in
Honduras
• Linking Nutrition Support with Treatment of People Living with HIV: Lessons
being Learned in Kenya
• Patterns of Poverty and Inequality in Vietnam: A Decomposition of Spatially
Weighted Small-Area Estimates
• Supermarkets Expansion and Dietary Patterns of Households: Some
Empirical Evidences from Guatemala
• HOW MANY ETHIOPIAS ARE THERE? Understanding the Role of
Geography in Smallholder Livelihood Options

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 IFPRI’s Web Site

www.ifpri.org

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 II. Socio-economic impact assessment

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 Conceptual decision making process technology socio-economic
assessment

Society

Net Research & Technology Other costs Risk &

>= Development + transfer + “Externalities” + Uncertainty
benefits costs costs (Premium)

Individual

Net Production Technology Risk &

>= costs + access + Uncertainty
benefits costs (Premium)

• Flows vs. stock => Changes in income versus expenditures

• Public vs. private goods
• Will all people ―winners‖ or ―losers‖ => Compensation criteria

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 Methodologies used for socio- economic
impact assessment

Level of analysis Methodologies

Farmer (individual and / or • Change in net income, profit (or net

household) present value)
• Partial or total budgets
Industry • Aggregation of individual net income
•Economic surplus models

Market and Trade • Economic surplus

• General equilibrium models
• Examination of trade flows

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 Partial or total budgets

• Data on income and production costs

• Partial refers to budget for 1 crop at a time
• Total budget refers to all crops and productive activities
produced by the household or productive enterprise
• Difference stock vs. flows of assets and liabilities
• Can be done 1 cropping season or multiple cropping seasons
• If more than 1 cropping season may need to consider time value
of money => adjust inflation

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 An example from Colombia: Potatoes 2003-
2004
Production costs “Industrial” type Production costs “Parda Pastusa” variety
varieties (US$/ha) (US$/ha)

Traditional IPM Traditional IPM

Activity Total % Total % Total % Total %

Parda Pastusa
income:
Direct costs 1,663 US$/ha

Labor 921.1 25 976.3 26 783.2 21 830.5 22

Residue collection, Soil preparation,
Planting, pest and disease control,
Industrial income:
crop management, harvest 1,543 US$ /ha
Inputs 2297.9 62 2352.6 62 2563.2 68 2599.5 68
Seed, fertilizer/correctives, pesticides,
.packing material, Biological control,
etological control, transportation

Subtotal Direct costs 3218.9 87 3328.9 88 3346.3 89 3430.0 89

Indirect costs 467.9 13 473.8 12 407.0 11 413.5 11

Leasing costs, administrative (6%),
interest

TOTAL 3686.8 100 3802.7 100 3753.3 100 3843.5 100

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 Economic Surplus Methodology
• Economics is about scarcity,
consumption, choice and Price

trade-offs
Supply
• People respond to incentives Po Supply Minimum
• Economy can be modeled price (or
with supply and demand breakeven
functions cost) willing
• Supply/demand functions Qo Quantity
to produce
aggregate all participants in something
the market Price

• Price and quantity pairs that Consumer Surplus

explain participant behavior

Demand
as producers and consumers
Minimum
• Limitations for work in Po
price willing
developing countries Demand Curve

to pay

Qo Quantity

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 Economic Surplus Models
Price
• Closed vs. trade economy Total economic surplus (TS) = CS + PS

• Large vs. small Supply

• Competitive vs. imperfect CS

• Technical change Po

(innovation) and spillovers PS

• Policy distortions such

Demand

quotas, taxes, subsidies,

price supports Qo Quantity

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 Limitations economic surplus and other economic
models

• Well-functioning markets
• Farmers risk neutral, maximize profits or minimize
costs => “HOMOS ECONOMICUS”
• Rely on key parameters from partial budgets and
other sources which also have limitations
• Approach is partial, no effects in other markets
• ―Ignores‖ input/output abatement nature of
technologies and existing bio-physical models
• Irreversibility ignored
• Externalities (environmental and public health)
and impacts outside markets not included
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 Technical change: Cost reduction

Price So

K S1

Po

P1

K = Reduction in the unitary

cost of production ($50 per
ton)

Qo Quantity
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 Standard versus ―customized‖ models
• Example for the open economy
mode
• Use standard models and formulas to
measure producer and consumer • Producer surplus in Country (PSA)
surplus • Δ PSA = P0 QA (K - Z) (1 + 0.5 ZεA)
• Derive formulas including quirks and
particularities of the economy • P0 = Counterfactual price without
innovation
• Reference text is : • K = (Yield difference) / εA = Shift of
• ―Science Under Scarcity: Principle the supply curve
and Practice for Agricultural Research• Z = - (P1- P0)/ P0
Evaluation, and Priority Setting‖ • εA = Elasticity of supply
Alston, Norton and Pardey
• Canned software
• DREAM – IFPRI
• MODEXC - CIAT

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 The process of data collection
• Fairly detailed surveys, examination of farm
records and/or results from experimental trials
that describe:
• Household characteristics
• Production processes
• Income and costs
• Use of labor and capital
• Financial/asset situation and allocation
• Increased use of qualitative and participatory
methodologies and analysis techniques
• Group and Team Dynamics
• Focus groups including gender differentiated
• Expert and leader opinion
• Role play
• Farmer field schools
• Direct and participant observation
• Case studies
• Structured interviews and experimental
economics

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 The process of data analysis

• Simple comparison of means,

indicators and data
• Complex econometric/statistical
models econometric/statistical
analysis measuring effects, causality
and relative importance
• Trying to control significant problems
such as:
• Sample size
• Non-randomness
• (Self) selection and program placement
bias
• Simultaneity (decisions)
• Un-observed and/or omitted variables

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 III. What about Genetically Modified Crops
and Biotechnology?

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 What is biotechnology?
• Manipulation of living organisms for a useful
purpose
• Definition that covers a broad range of
techniques
• Traditional: Plant breeding, tissue culture, micro-
propagation
• Modern: Marker assisted selection, Genetic
Modifications and Genomics
• Only GM products are currently regulated for
biosafety

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 Centered around
• Four crops:
• corn
• soybeans
• canola
• cotton
• Four countries
represent 85%
adoption
• USA,
• Argentina
• Canada
• Brazil
• Two types of
events
• Tolerance to
herbicides
• Insect
resistance

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 Research Questions?

• What is the potential size of the economic

benefits from use of a GM technology in a
specific site, country or region?
• How are these benefits likely to be distributed
among farmers, consumers, gene innovators,
seed suppliers?
• GM innovations are in most cases IPR
protected, how is this new development likely to
affect previous questions?

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 U.S. Distribution of Benefits From Insect
Resistant Cotton
Total benefit estimates
(Millions US $)
300
Consumers
250 19%
63 Industry
200 36%
93
85 US Farmers
150
141 45%
Industry
100
80 97 US Farmers
50 Consumers
58 37 37 Foreign Farmers
0
-22 -12 -14
Falck-Zepeda, Traxler & Nelson 1999, 2000
-50 1996 1997 1998
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 The case of insect resistant cotton in Northern
Mexico (1997-1998)

1997 1998 Average But

Monsanto/D&PL net • Country and region have very
profit /ha 70.09 70.09 70.09 particular characteristics
Net change in
• Institutional setting is peculiar
7.64 582.01 294.83
producer profit • Formula based agriculture
Area planted with Bt in • Very good technical assistance
the Comarca Lagunera 4,500 8,000 6,250 and knowledge transfer of
Monsanto/D&PL total technology use
315,420 560,747 438,083
net incomel • Credit tied to technical
Total producer surplus
assistance
34,382 4,656,091 2,345,237
• Irrigated
Monsanto/D&PL %
share of total surplus
• High levels of damage
90% 11% 16%

Producers % share of
total surplus 10% 89% 84%

Source: Traxler, Godoy-Avila, Falck-Zepeda and

Espinoza-Arellano,2001
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 Socio-economic impact of herbicide tolerant
soybeans in the U.S.

• Note the ―story a little bit different

• Producer seem to benefit very little from this technology => Why then they
continue to adopt?
• Explanation is that economic surplus does not capture non-price effects such
as ease of management or ability to use reduced or no till management
practices

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 What determines whether farmers ―win‖ or ―lose‖

• Price of the technology and of output

(fiber and seed)
• Pest infestation and pest dynamics
(including secondary pests)
• Use of appropriate germplasm and
the ability to have the most
appropriate germplasm over time
and location
• gene technology without the
appropriate germplasm is useless
• Production alternatives available
• Available information to farmers
about technology

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 What determines whether farmers ―win‖ or ―lose‖
…continued

• Type of input and output economic

markets (monopoly vs. competitive)
• Institutional issues: contractual
agreements and obligations
• Input use and management
• Ex ante and Ex post risk profile and
situation
• Functional seed markets
• Institutional framework
• Credit and other financial
characteristics of the producer unit

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 Applied Economics Literature Review

• Experience in South Africa

for example has changed
over time
• ―Technological triumph,
but an institutional failure‖
Gouse 2005
• Institutional and
community issues can
negate technological
benefits completely

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 Broader Implications
• Emerging picture is consistent with other ―new‖ crop
varieties:
• Adoption and returns vary by location, time, crop, type of
technology
• Impact difficult to measure; no single method sufficient
• Time period is still short
• Institutional and governance factors and market arrangements
may be more important than the technology itself as a
determinant of impact
• Biotechnology is a knowledge intensive innovation in terms of
R&D, deployment and transfer, and use by farmers
• Impacts on health, environment, equity, and poverty have not
received much attention yet
• Literature: narrow authorship and generalizations are still a little
problematic

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