Modelling the Poverty Modelling the Poverty Impacts of Livestock Policy Impacts of Livestock Policy Change: Evidence from Change: Evidence from Vietnam and Senegal Vietnam and Senegal PPLPI Steering Committee Meeting David Roland-Holst Joachim Otte & FAO Headquarters, Rome Saule Kazybayeva 27-28 June 2006 A Living from Livestock Pro-Poor Livestock Policy Initiative
Contents 1. Introduction 2. Livestock and Rural Poor Livelihoods 3. Smallholders and Food Supply 4. HPAI – Challenge and Opportunity from a Major Animal Disease Risk 5. Conclusions A Living from Livestock IPALP 2 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Introduction • Livestock’s potential to improve livelihoods of the rural poor depends on complex economic linkages and behavior. • In recognition of this, a special research component of PPLPI is dedicated to elucidating the economic fundamentals of smallholder livestock production. • The goal of this work is support more effective pro-poor policies at all levels. A Living from Livestock IPALP 3 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Integrated Poverty Assessment for Livestock Policy (IPALP) - Schematic Overview Focus Focus Focus Focus Macro Macro Data Development Data Development Policy Simulation Policy Simulation Static Analysis Static Analysis Meso Meso Micro Micro Vietnam Vietnam Method Method Method Method Senegal Senegal For each country, a toolkit and training Peru Peru module can be produced for capacity ... ... Country Country Country Country development. A Living from Livestock IPALP 4 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
2. Livestock and Rural Poor Livelihoods • With the benefit of improved sector data and detailed microeconomic surveys, we are seeing again and again the importance of livestock to smallholder livelihoods. • The challenge before us is to translate livestock dependence into a sustained source of income growth. • In most of the cases examined so far, improving the terms for smallholder participation in food markets offers the best means of doing this. A Living from Livestock IPALP 5 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
West Africa: National Livestock Dependence 100 Livestock in Total GDP, 1990 (percent) Mauritaina 80 60 Cape Verde Mali 40 Averages Niger Burkina (27.5%, 28%) Senegal Guinea-Bissau Gambia 0 20 40 60 80 100 Nigeria Livestock in Total GDP, 2000 (percent) 20 Ghana Liberia Benin Guinea Togo Sierra Leone Source: Cheik Ly, 2006 Ivory Coast OECD 0 A Living from Livestock IPALP 6 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Senegal: Poverty Headcounts 90 80 70 Poverty Headcount Percent 60 National 50 Averages 40 30 20 10 0 a k k l I r r l s a a s D e a c d a o c i g d e n b k u a i L l h u o n i t o r a o l h c a o u o i K u D L n T F t o o a L a - i K u i t c N D n g a a b i S Z m a T $1/day National Poverty Line A Living from Livestock IPALP 7 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Vietnam: Poultry Income 1.0 Poultry income 0.9 is far more equitably Cumulative Income and Poultry Revenue distributed than 0.8 total income ! 0.7 0.6 Total Income 0.5 Poultry Income Equality 0.4 0.3 Sample of 600/65,000 0.2 representative households, rural and urban income 0.1 quintiles for each of 60 provinces. (VHLSS:2002) 0.0 .00 .20 .40 .60 .80 1.00 Cumulative Population Share A Living from Livestock IPALP 8 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Vietnam: Pig Income 1.0 0.9 0.8 Cumulative Income and Pig Revenue 0.7 0.6 Total Income 0.5 Pig Income Equality 0.4 0.3 0.2 0.1 0.0 .00 .20 .40 .60 .80 1.00 Cumulative Population Share A Living from Livestock IPALP 9 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Microeconomic Fundamentals There are three ways to improve the balance sheets of farmers: 1. Increase output 3. Reduce Cost 2. Increase price A Living from Livestock IPALP 10 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Vietnam: Generic Livestock Promotion All Livestock: Simulated 7% annual productivity growth All Livestock 2005-2015 50 45 40 Percent Change in Household Income 35 30 25 20 15 10 5 0 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 ← Poorer Household Income per Capita Richer → A Living from Livestock IPALP 11 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
3. Smallholders and the Food Supply • In most developing countries, the majority of rural income arises from marketing food products. • Livestock’s contribution to this income depends on complex market supply chains extending from the farm gate to urban and even foreign households. • Our research on these linkages indicates that the terms of this market participation are far from achieving their potential to help the rural poor. A Living from Livestock IPALP 12 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Vietnam: Rural Income Sources Other 11% Self- employment 18% Marketed Agriculture Wages 62% 9% Source: 2002 VLSS A Living from Livestock IPALP 13 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Linkage Analysis with SAMs • Multiplier analysis with Social Accounting Matrices (SAMs) offers a convenient way to examine livestock’s linkages across the economy. • To date, we have developed five SAMs for Vietnam and three for Senegal, working with different aggregations to look at a variety of income-expenditure linkages. A Living from Livestock IPALP 14 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Multiplier Linkages to Households Vietnam (Vn) and Senegal (Sn) Compared 40 Because of their VnPoultry more diverse 35 VnPig VnCattle linkages to the Percent of Value from New Livestock Demand VnOthLvstk economy, higher SnLvstk 30 Housedhold Income Multipliers income groups generally enjoy 25 larger multiplier effects. 20 15 10 5 0 HRur01 HRur02 HRur03 HRur04 HRur05 HUrb01 HUrb02 HUrb03 HUrb04 HUrb05 A Living from Livestock IPALP 15 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Senegal: Income Effects from Livestock 40 More livestock Relative and Absolute Income Effects (percent) but livestock income 35 income goes to is more important to higher income Senegal’s rural poor. 30 groups, 25 20 15 10 5 0 HRur01 HRur02 HRur03 HRur04 HRur05 HUrb01 HUrb02 HUrb03 HUrb04 HUrb05 Relative Absolute A Living from Livestock IPALP 16 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Policy Simulation • Using simulation models, we can assess a wide variety of policies ex ante . • Because we develop these models with consistent macro-micro datasets, we can evaluate economywide linkages and detailed incidence such as poverty alleviation. • Here we look at two generic kinds of scenarios: • Policies targeted to improve livestock production • Policies to improve market access A Living from Livestock IPALP 17 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Simulations of Producer Support and Trade Liberalization: Senegal Higher income Three Generic Scenarios : 45 groups capture Prod – Doubling of livestock Percent Change in Annual Income 40 productivity most of the gains KSub – 20% capital subsidy to 35 from generalist livestock sector policies. Pro-poor TLib – Unilateral trade 30 liberalization policies need 25 targeting. 20 15 10 5 0 HRur01 HRur02 HRur03 HRur04 HRur05 HUrb01 HUrb02 HUrb03 HUrb04 HUrb05 -5 A Living from Livestock IPALP 18 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
4. HPAI – Challenge and Opportunity from a Major Animal Disease Risk • Pathogens associated with livestock pose a challenge to public health and economic security at the national and global levels. • A dramatic recent example of this is Highly Pathogenic Avian Influenza, which has potentially momentous consequences for human society. • Smallholder livestock producers can be seriously threatened by conventional measures to fight diseases like this. • On the contrary, we believe disease risk management can be an opportunity to improve their circumstances. A Living from Livestock IPALP 19 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
Risk Management from a Development Perspective • HPAI presents an unusual opportunity for international cooperation because poor rural households can contribute the global commons of disease prevention. • Their participation in this effort is unlikely to be voluntary, and indeed should be rewarded if success is to be achieved. • To make such policies effective, economic analysis of incentives and localized design and implementation are needed. A Living from Livestock IPALP 20 Pro-Poor Livestock Policy Initiative Otte, Roland-Holst, & Kazybayeva
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