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 Egypt The Gambia Tunisia Libya India Pakistan Can’t- be-saved Can’t-be-saved Walking Wounded Should Receive Food Walking Wounded Can’t-be-saved 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 1948 self sufficient wheat producer 1965 Net exporter

• Mexico:
• •

• 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 selfshading 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 Paradigm • • Increase production Maximize yields Sustainable

Production
Economics Paradigm • Maximize profit or net returns...is not the maximum yield

Agriculture Paradigm • • Improve and/or maximize livelihoods Reduce vulnerability • • • Environmental / ecological Gender Collective action

Improve fertilizer and water efficiency

Time
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CGIAR Research Centers

ICARDA
Agriculture in the dry areas Aleppo, Syria

ICRISAT
Semi-arid tropical agriculture Patancheru, India

IFPRI ®
Food policy Washington, D.C., USA

BIOVERSITY
Agricultural biodiversity Rome, Italy

WARDA
Rice in West Africa Bouaké, Côte d’Ivoire

CIMMYT
Maize and wheat Mexico City, Mexico

WorldFish
Penang, Malaysia

CIAT
Tropical agriculture Cali, Colombia

IRRI
Rice Los Baños, Philippines

CIP
Roots and tubers Lima, Peru

IITA
Tropical agriculture Ibadan, Nigeria

ICRAF
Agroforestry

IWMI
Water resources Colombo, Sri Lanka

CIFOR
Forestry 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 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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Initiative

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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 benefits

>=

Research & Development costs

+

Technology transfer costs

+

Other costs “Externalities”

+

Risk & Uncertainty (Premium)

Individual Net benefits

>=

Production costs

+

Technology access costs

+

Risk & Uncertainty (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 Farmer (individual and / or household) Industry Methodologies • Change in net income, profit (or net present value) • Partial or total budgets • Aggregation of individual net income •Economic surplus models • Economic surplus • General equilibrium models • Examination of trade flows

Market and Trade

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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 20032004
Production costs “Industrial” type varieties (US$/ha) Traditional IPM Production costs “Parda Pastusa” variety (US$/ha) Traditional IPM

Activity

Total

%

Total

%

Total

%

Total

%

Direct costs

Parda Pastusa income: 1,663 US$/ha

Labor Residue collection, Soil preparation, Planting, pest and disease control, crop management, harvest Inputs Seed, fertilizer/correctives, pesticides, .packing material, Biological control, etological control, transportation Subtotal Direct costs

921.1

25

976.3

26

783.2

21

830.5

22

Industrial income: 1,543 US$ /ha
2297.9 62 2352.6 62 2563.2 68 2599.5 68

3218.9

87

3328.9

88

3346.3

89

3430.0

89

Indirect costs Leasing costs, administrative (6%), interest TOTAL

467.9

13

473.8

12

407.0

11

413.5

11

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 trade-offs • People respond to incentives • Economy can be modeled with supply and demand functions • Supply/demand functions aggregate all participants in the market • Price and quantity pairs that explain participant behavior as producers and consumers • Limitations for work in developing countries
Price

Po

Supply

Qo

Quantity

Supply Minimum price (or breakeven cost) willing to produce something

Price Consumer Surplus

Po Demand Curve

Demand Minimum price willing to pay

Qo

Quantity

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Economic Surplus Models
• • • • Closed vs. trade economy Large vs. small Competitive vs. imperfect Technical change (innovation) and spillovers • Policy distortions such quotas, taxes, subsidies, price supports
Price Total economic surplus (TS) = CS + PS Supply CS Po PS Demand

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 S1

K Po

P1

K = Reduction in the unitary cost of production ($50 per ton)

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Qo

Quantity

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Standard versus ―customized‖ models
• • • Use standard models and formulas to • measure producer and consumer • surplus Derive formulas including quirks and particularities of the economy • • Reference text is : ―Science Under Scarcity: Principle and Practice for Agricultural Research• Evaluation, and Priority Setting‖ • Alston, Norton and Pardey Canned software
• • DREAM – IFPRI MODEXC - CIAT

Example for the open economy mode Producer surplus in Country (PSA) Δ PSA = P0 QA (K - Z) (1 + 0.5 ZεA) P0 = Counterfactual price without innovation K = (Yield difference) / εA = Shift of the supply curve Z = - (P1- P0)/ P0 εA = Elasticity of supply

• •

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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, micropropagation • 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
300 250 200
Total benefit estimates (Millions US $)

63

Industry

Consumers 19%

93
150 141 100 80 50 58 0 -50 -22 1996 -12 1997 -14 1998 37 37 97 85 Industry

36% US Farmers 45%

US Farmers
Consumers Foreign Farmers
Falck-Zepeda, Traxler & Nelson 1999, 2000
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The case of insect resistant cotton in Northern Mexico (1997-1998)
1997 Monsanto/D&PL net profit /ha Net change in producer profit Area planted with Bt in the Comarca Lagunera Monsanto/D&PL total net incomel 70.09 1998 70.09 Average 70.09

7.64

582.01

294.83

4,500 315,420

8,000 560,747

6,250 438,083

Total producer surplus
Monsanto/D&PL % share of total surplus Producers % share of total surplus

34,382

4,656,091

2,345,237

90% 10%

11% 89%

16% 84%

But • Country and region have very particular characteristics • Institutional setting is peculiar • Formula based agriculture • Very good technical assistance and knowledge transfer of technology use • Credit tied to technical assistance • Irrigated • High levels of damage

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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