Agricultural extension as an escape from the poverty trap : Evidence from the Peruvian Highlands

Isabelle Bonjean, University of Namur

It is now commonly accepted that poverty alleviation requires a significant increase in incomes drawn from land-related activities (FAO 2009). The fear that increasingly stringent food quality and safety norms will result in the exclusion of small farmers from the agri-food supply chain reinforces the call for best practices and technology. These concerns have resulted in numerous projects aiming to diffuse new technologies, which are reported by a growing literature assessing the return of these innovations. In this literature, prices received for each unit of output are usually assumed to be homogeneous among all households. I contest this over-simplification and discuss how it could lead us to misunderstand the distributional effects of monetary gains following the diffusion of new technologies. I use the implementation of a community extension programme in the Peruvian highlands, where the main income source is raw milk and fresh cheese production sold on a highly segmented market, to assess the heterogeneity of the increase in the production value following the innovation process. It appears that households that where poorer before the implementation of the programme benefit more from the presence of an extension agent in their community. This effect is driven by two channels of return : a quantity and a price increase. I discuss the mechanisms behind both effects and their implications for the income distribution. The findings stress the importance of considering and understanding the price mechanism, when assessing the return to innovation adoption on segmented markets, which are highly common in the developing world.

Venue: Conference Room

Date: 10 April 2014

Time: 12:30 - 13:30  CET