Rural transformation and structural change: insights from developing countries facing globalization

Agriculture has a key role in development and poverty reduction. But beyond its role in producing food, it should also generate activities, income, and employment to facilitate rural transformation and structural change. This is particularly the case for developing countries facing the challenges of incipient economic transitions and quickly evolving demographic context characterized by growing cohorts of new labor market entrants. While a larger labor force offers countries new opportunities for growth related to the "demographic dividend," it also could pose socio-political risks if investments and public policies are inappropriate to support the processes underway. The paper explores rural transformation and structural change by presenting an in-depth analysis of the socio-economic development of rural, mostly agricultural-based, regions in Africa and Meso-America where the RuralStruc Program collected and analyzed about 8,000 rural household surveys. The results of the Program show that contrary to conventional wisdom, the liberalization of agriculture has not led to a massive agricultural restructuring or to a rapid integration of farmers into the global economy. Neither has it led to the development of the buoyant rural non-farm economy so often discussed in the literature. The investigation also shows a strong relationship between income and the diversification/ specialization of rural households in terms of economic activities. An " inverted U" pattern is observed and can be understood as follows: whereas poorer households diversify to mitigate risks, households that are more well-off can make larger investments and begin to specialize to take advantage of these new assets. In Sub-saharan Africa in particular, high level of risks and limited economic opportunities constrain households' options and hence their economic returns. This situation can generate possible poverty traps for low-income farmers. Considering these socio-economic challenges in light of the dramatic demographic shift underway on the continent, policy orientations should reintegrate structural issues and avoid short-term policy priorities, which have driven most of the agenda over the last 30 years. (Texte integral