RIFT VALLEY UNIVERSITY

FUCALTY OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

Agricultural economics II, 2nd assignment

Done by: -
Name ID No.
1. Rediet Surafel 111/11
2. Kemal Tibeso 163/11
3. Abush Anota 127/11
4. Bedene kebato 135/11
5. Yodit Gidey 208/11

Submitted to: -Teacher Abiyot

Date of Submission: -15/04/2021

 1. Explain the briefly about institutional economics.

It is an economics school that develops the importance of non - market factors (as social institutions) in
influencing economic behavior, subordinating economic analysis to sociological factors, history, and
institutional development. A school of economic thought that recognizes the role of institutions in
shaping economic relations and the society.
Institutional economics focuses on understanding the role of the evolutionary process and the role of
institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen's instinct-oriented
dichotomy between technology on the one side and the "ceremonial" sphere of society on the other. Its
name and core elements trace back to a 1919 American Economic Review article by Walton H.
Hamilton. Institutional economics emphasizes a broader study of institutions and views markets as a
result of the complex interaction of these various institutions (e.g. individuals, firms, states, social
norms). The earlier tradition continues today as a leading heterodox approach to economics.
Institutional economics builds on, modifies and extends neoclassical theory, which postulates that
individuals have perfect information, thereby unbounded rationality. By contrast, the institutional
approach proposes that individuals have incomplete information and limited mental capacity by which to
process information. Human beings, as a consequence, impose constraints on human interaction in order
to structure exchange and reduce risk and transaction costs, which are denominated institutions (North,
1990 and 2005). Institutions can be either formal, such as constitutions, regulations or contracts, or
informal, such as attitudes, values, norms of behavior and conventions.

2. Discuss the importance of rural development and its contribution to economic growth.

Rural development usually refers to the method of enhancing the quality of life and financial well-
being of individuals, specifically living in populated and remote areas.
Traditionally, rural development was centered on the misuse of land-intensive natural resources such as
forestry and agriculture. However today, the increasing urbanization and the change in global production
networks have transformed the nature of rural areas.
Rural development still remains the core of the overall development of the country. More than two-third
of the country’s people are dependent on agriculture for their livelihood, and one-third of rural Ethiopia
is still below the poverty line. Therefore, it is important for the government to be productive and provide
enough facilities to upgrade their standard of living.

Rural development is a term that concentrates on the actions taken for the development of rural areas to
improve the economy. However, few areas that demand more focused attention and new initiatives are:

 Education
 Public health and Sanitation
 Women empowerment
 Infrastructure development (electricity, irrigation, etc.)
 Facilities for agriculture extension and research
 Availability of credit
 Employment opportunities
Importance of Rural Development

Rural development is important not only for the majority of the population residing in rural areas, but
also for the overall economic expansion of the nation.

Rural development is considered to be of noticeable importance in the country today than in the olden
days in the process of the evolution of the nation. It is a strategy that tries to obtain an improved and
productivity, higher socio-economic equality and ambition, and stability in social and economic
development.

The primary task is to decrease the famine that exists in roughly about 70 percent of the rural population,
and to make sufficient and healthy food available.

The secondary task is to ensure the availability of clothing and footwear, a clean environment and house,
medical attention, recreational provision, education, transport, and communication.

Rural development is important because of the following reasons:

(i) A large proportion of population is living in rural areas: - Rural people account for about
3/4th (85%) of the total population. They have always lagged much behind the overall
progress of the economy.

(ii) Agriculture: Major source of livelihood: - Agriculture is still a major source of livelihood
in rural areas. More than two-third of India’s population depends on it. So, the development
of agriculture will contribute to the betterment of rural areas and rural people.

(iii) Lack of basic necessities: -Majority of poor people live in rural areas. They do not have
access to basic necessities of life like food, health facilities, sanitation, etc.

3. Discuss the role of rural institution in rural development.

The formation of rural institutions is the first joint efforts by people (beneficiaries) towards self and rural
development. This is in support of approach is a strong community commitment to offer resources and
information, overcome collective problems and improve the functioning of local labor markets. To rural
development thus involves the initiators, supporters and beneficiaries of any defined development effort.
The theoretical literature and empirical findings from previous studies show that each individual rural
community group by developing programs that transform communities through supporting self-reliance
and underlining popular participation in their development activities impact positively on rural
development. Besides, this study also observes that there is broad appreciation of non-governmental
organizations (NGOs) having an important role to play in supporting the rural poor to break out of their
condition of poverty. For instance, NGOs‟ insistence on the empowerment of the poor as the key to their
transformation provides groundwork for effective partnership. However, rural development cannot take
place simply as a result of empowerment of the poor through supporting self-reliance and underlining
popular participation par se but by addressing the obstacles faced by the rural poor such as inappropriate
policies, missing or uncompetitive markets, weak rural infrastructure, inadequate processing
opportunities and financial services, among others. Community groups such as smallholder farmer
groups (SFGs) provide opportunities for people to participate at grassroots levels. For instance, most
community groups activities occur in farming systems with the family being important in planning,
decision making and implementation of the projects. Such groups also operate within a community level
network of relations, the argument continues. To this aspects, and add that expansion of smallholder
farming through their organized groups stimulates faster rate of poverty reduction. In addition,
smallholder farmer groups mediate in intra-community conflicts, build infrastructure, attract other
development actors (such as donors, NGOs) into the community and therefore help many individuals to
work more effectively and collectively.

4. What is the impact of co-operate institution to rural development.

Role of Institutions in Economic Development: A country’s social and economic institutions

dominate the process of economic development. They determine attitudes, motivations and
conditions for development. If institutions are elastic and encourage people to avail economic
opportunities and further to lead higher standard of living and inspire them to work hard, then
economic development will occur.
On the other hand, if they discourage all this, the economic development will be hampered and
adversely affected. This has been rightly observed by UNO that economic development is
impossible in the absence of appropriate atmosphere. So economic progress will not take place
unless atmosphere is favorable to it.

The people of the country must desire progress and their social, economic, legal and political
institutions must be favorable to it. Emphasizing the significance of these institutions in economic
development, Prof. A.K. Cairn-cross says, “Development is not governed in any country by
economic forces alone and the more backward the country, the more this is true. The key to
development lies in men’s mind, in the institutions in which their thinking finds expression and
the play of opportunity on ideas and institutions.”

Therefore, right king of institutions or growth promoting institutions are a pre-requisite for the
rapid economic development of a country. These institutions may be called growth promoting
which permit or stimulate, rather than impede, the adoption of new techniques and the formation
of productive capital.

In a broad sense, institutions promote economic growth to the level that they associate efforts
with regard to permit increased division of labor, expansion of trade and freedom to seize
economic opportunities.

In this regard, Prof. W.A. Lewis observed, “Institutions promote or restrict growth according
to the protection, they accord to effort, according to the opportunities they provide for
specialization and according to the freedom of action they permit.”
5. Discuss about Ethiopia land policy, property right and its protection right over the last three decades.

The Ethiopian Constitution asserts state ownership of land; there are no private property rights in
land. Even if there are national debates on the existence of different ownership and tenure regimes
for land in Ethiopia, the Government of Ethiopia is not prepared at this time to legalize private
property rights in land. While the Government of Ethiopia has decentralized administration of land
to the regional governments, the formulation of broad land policy still rests with the federal
government.

In Ethiopia, property rights get legal protection mainly under the FDRE Constitution (the
Constitution), the 1960 Civil Code (the Code), other codes, some other pieces of legislation and
laws that establish and define the powers and functions of judicial and administrative institutions.

To say that an individual has a property right over something simply means - in a legal and practical
sense-that an individual can say that a thing belongs to him and others will act accordingly. More
specifically, we say that an individual has a property right over something if he has the right to
control that property, consume that property, and alienate (sell) that property. An individual has a
property right over an orange, for example, if he can consume or sell it. We can argue simply
enough that property rights must precede economic growth, since private property rights provide
the incentive required for production and exchange. They help to stabilize individual expectations
about the behavior of others. Though intuitively plausible, these arguments require elaboration.
Reference

1, Comparative Approaches to Old and New Institutional Economics, Memduh Alper Demir
(University of Kastamonu, Turkey) Is Turkey a Favorable Environment for FDIs?: Institutional
Outlook to EU-Turkey FDI Flow: Business & Management Book Chapter | IGI Global (igi-global.com)
2, Patrick Nalere*, Milton Yago and Kenny Oriel, The contribution of rural institutions to rural
development: Study of smallholder farmer groups and NGOs in Uganda
3, Impact of Institutions on RuralLivelihoods Case Study of VillageMundotiNetar, Tejaram,
CENTRAL UNIVERSITY OF RAJASTHAN, 6 December 2017
4, Ethiopia Land Policy and Administration Assessment, Final Report with Appendices,May
2004.
5, Legislative Protection of Property Rights in Ethiopia: An Overview, Muradu Abdo