Agricultural Exports, Urbanization and African Growth: On ... · Agricultural Exports, Urbanization and African Growth: On Cocoa and Cities in Ivory Coast and Ghana ... change in

Agricultural Exports, Urbanization and African Growth:On Cocoa and Cities in Ivory Coast and Ghana

Remi Jedwab

Paris School of Economics and STICERD (LSE)

Work (very much) in progress

NSF-AERC-IGC Workshop, 04 December 2010.

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Introduction Motivation

Motivation

Cities and Growth in Developing Countries:

Africa was almost unurbanized one century ago. It has recently known dra-matic urban growth (Satterwhaite 2007, WDR 2009).

Development is concomitant to the structural transformation, the transitionfrom rural-based agriculture to city-based manufacturing (Caselli & Cole-man II 2001, Michaels, Rauch & Redding 2008).

Scale effects (infrastructure, etc.) and agglomeration economies could makecities engines of growth in developing countries (Duranton 2008, WDR 2009,Venables 2010, Mc Kinsey 2010).

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Motivation

Contradicted by Empirical Evidence on Africa?

”Urbanization without growth”, ”explosive urbanization” or ”over-urbanization”(Bairoch 1988, Fay & Opal 2000): Africa has urbanized without it beingexplained by economic development.

Attributed to pull and push factors feeding rural exodus: urban bias (Bates1981, Bairoch 1988, Davis & Henderson 2003) or natural catastrophes (Bar-rios, Bertinelli & Strobl 2006).

Missing manufacturing and tradable service sectors in Africa. Differs fromChina and India (Satterwhaite 2007, Bosworth & Collins 2008).

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Figure: Manufacturing and Service Sectors and Urbanization in DevelopingCountries in 2000.

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Figure: Primary Exports and Urbanization in Africa in 2000.

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Motivation

A specific model of African urbanization?

Urbanization is driven by mining and cash crop windfalls.

Agricultural exports have weak linkages to the rest of the economy (Hirschman1958, Dercon & Zeitlin 2009, Collier & Dercon 2009). Could ”agricultural”cities be powerful engines of growth?

Case study on cocoa and cities in Ivory Coast and Ghana.

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Introduction This Paper’s Approach

This Paper’s Approach

We take an empirical micro approach within two countries.

We assemble a historical data set on cities in Ivory Coast and Ghana.We combine this with a district data set on cocoa production.Ghana 1900-2000: N = 711, Ivory Coast 1948-98: N = 276.

The past: cash crop production explains more than half of non-primateurbanization in both countries

The present: cash crops create ”consumption” cities with cash cropfarmers (1/3), traders (1/3) and service employees (17%).

The future: cities of the old cocoa-producing regions keep growing.Per capita income? Impact of ”consumption” cities vs. ”production”cities on economic growth?

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Theoretical Discussion, Context and Data Theoretical Discussion

Theoretical Discussion 1/2

Cocoa is produced by ”eating” the virgin forest. When cocoa trees are tooold (after 25 years), producers have no choice but to move to another forest.Districts suitable to cocoa develop when cocoa is indeed produced.

Phase 1 (no cocoa production yet): settlement is limited (land is notcleared yet, humidity = disease)

Phase 2 (new cocoa-producing district): cocoa producers clear the landand plant cocoa trees. After a few years, district population and wealthincrease, but this effect is concentrated in the cities.

Phase 3 (old cocoa-producing district): cocoa trees are old, productiondecreases, but cities do no collapse.

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Theoretical Discussion, Context and Data Theoretical Discussion

Theoretical Discussion 2/2

Why does development take the form of urbanization?

1 Settlement: some cocoa farmers live in city.

2 Production linkages: other sectors emerging?

3 Consumption linkages: cocoa farmers spend their high income onurban goods.

4 Infrastructure: cocoa districts invest in infrastructure.

5 Urban demographic transition: natural increase becomes a largesource of urban growth.

6 Public sector: the cocoa tax funds gvt consumption.

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Theoretical Discussion, Context and Data Context

Context: Ivory Coast, Ghana and Cocoa

Largest producers in the world (total market share around 60%).

Production take-off in the 1920s in Ghana, 1960s in Ivory Coast. Highcontribution to exports and GDP. Ivorian farmers also grow coffee (weanalyze cocoa + coffee in Ivory Coast).

Extensive production (labor, forest), no capital except cocoa trees, nolocal processing. 1/4 of their population depends on cocoa production.

The forested surface of Ivory Coast was 9 million hectares in 1965 and 2.5millions in 2000. Ghana: from 8.2 millions in 1900 to 1.6 in 2001.

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Theoretical Discussion, Context and Data Data

Urban Data

Variables:Udt is the urban population of district d at time t.Urban: cities are defined as ≥ 5000 localities.tIvory = 1901, 1911, 1921, 1931, 1948, 1955, 1965, 1975, 1989, 1998

tGhana = 1901, 1911, 1921, 1931, 1948, 1960, 1970, 1984, 2000

Primary Sources:Censuses + administrative counts: size for each city-year.Use GIS to extract urban population for any district decomposition.

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Cash Crop Production Data

Variables:Cdt is cocoa production value in district d between t − 1 and t.Value (in 2000$): volume × deflated producer price.tIvory = 1948, 1955, 1965, 1975, 1989, 1998

tGhana = 1901, 1911, 1921, 1931, 1948, 1960, 1970, 1984, 2000

Ghana: cocoa districts and not administrative districts.

Ivory Coast: district-year coffee production data as well.

Primary Sources:Government agency responsible for cocoa production and taxation:CAISTAB in Ivory Coast, COCOBOD in Ghana.

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Figure: Value of Cash Crop Production (1900-2000) and Cities (2000).

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Econometric Framework Long-Differences Model

Econometric Specification: Long-Differences Model

For district d , we run:

∆Ud = α + δ Cd + ηSd + ed (1)

∆Ud : change in urban population of district d between t0 and T .Cd : cocoa+coffee production value of district d between t0 and T .Sd : district-level controls.

Less sensitive to measurement errors than first-differences or fixed effectsmodels (Griliches & Hausman 1986, McKinnish 2008).

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Set of Controls

1 Political Economy: cocoa suitability dummy (= Southern), nationalcity (Abidjan-Bouake-Yamoussoukro/Accra-Kumasi), regional capital.

2 Economic geography: paved road (1955), railway (1955), port (1955),coast, distance to the coast.

3 Physical geography: average annual precipitations, average annualmaximal temperature.

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Cash Crops and Urbanization, Long-Differences Model.

Dependent Variable: Change in District Urban Population(Pop. in ≥5000 Localities)

Ivory Coast 1948-98 Ghana 1901-2000(1) (2) (3) (4)

District cocoa/coffee prod. 103.8*** 143.9*** 63.4*** 106.3***(t0 → T , million 2000$) [37.7] [46.9] [15.8] [31.6]

District mineral prod. 24.5*(t0 → T , million 2000$) [12.9]

Observations 46 46 79 79R-squared 0.47 0.79 0.85 0.90All Controls N Y N Y

Note: * significant at 10%; ** significant at 5%; *** significant at 1%. Standard errors

clustered at the regional level.

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Econometric Framework Fixed Effects IV Model

Tentative IV Strategy

These long-difference model results are complemented by a (district andtime) fixed effects IV model. IV strategy based on 3 facts:

1. Cocoa production is constrained by land suitability:

Only in tropical forests.

Cocoa producers replace forest trees with cocoa trees (bestpedological + climatic conditions).

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Figure: Share of District Area Suitable to Cocoa Production.

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1. Cocoa production is constrained by land suitability.2. Cocoa production is moving in space:

Farm production peaks after 15 years, then slowly declines (old cocoatrees are much less productive).

Replanted cocoa trees die or are less productive since the environmentwas modified with deforestation: weeds, humidity, erosion, winds, etc.

Much cheaper for cocoa producers to replant somewhere else.

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1. Cocoa production is constrained by land suitability.2. Cocoa production is moving in space.3. The cocoa frontier is moving westward:

Cocoa production has started in the South-East of both countries, forhistorical reasons.

Cocoa producers had to move westward, within the South.

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Figure: District Density of Cocoa Production and Cities in 1948.

1948 in Ghana, 1948 in Ivory Coast.

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Figure: District Density of Cocoa Production and Cities in 1960-1965.


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Figure: District Density of Cocoa Production and Cities in 2009.


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1. Cocoa production is constrained by land suitability.2. Cocoa production is moving in space.3. The cocoa frontier is moving westward:

Cocoa production has started in the South-East of both countries, forhistorical reasons.

Cocoa producers had to move westward, within the South.

Instrument for cash crop production: suitable × cocoa front.

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Main Results (Please Refer to the Paper)

1 Cash crop production respectively explains 90% and 60% of urbangrowth in the forested regions of Ivory Coast and Ghana.

2 Robust to controls and specification checks.

3 No significant effect of cocoa production on rural population. Cashcrop production has a pure urbanizing effect.

4 The urban growth effect can be equally decomposed between existingcities growing further and new cities (strong ”city formation” effect).

5 Cities keep growing in old cocoa-producing regions: cocoa productionlaunches the urbanization process, which then becomes self-reinforcing.

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Rural-Urban Linkages Sectoral Decomposition of Urban Growth

Rural-Urban Linkages:

Cash crop production explains 60-90% of urbanization in forested regions.

We use household survey (Ivory Coast: LSMS 1985-88, ENV 1998 & 2002,Ghana: GLSS 1987-88 & 2005) and census (Ghana 2000) data to identifythe channels behind this relationship. No data before 1980s...

Sectoral Decomposition of Urban Growth: take as an example theCentre-Ouest region of Ivory Coast between 1985-88 and 2002.

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Rural-Urban Linkages Sectoral Decomposition of Urban Growth

Sectoral Decomposition of Urban Growth in Centre-OuestRegion, Ivory Coast

Center-Ouest Region 1985-88 - 2002+ 460,000 urban inhabitants

% of urban growth due to:

Non-Workforce 64.4Workforce 35.6

% of change in urban workforce due to:

Primary Sector [Cocoa farmers] 56.5 [34.4]Secondary Sector -9.1Tertiary Sector 52.6

Of which:

- Trade 24.3- Personal Services 17.6- Transport & Communications 8.8- Education & Health 2.7- Business Services & Banking 2- Administration -2.8Total 52.6

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Rural-Urban Linkages Individual Channels

Rural-Urban Linkages: New Cocoa-Producing Regions

1 A settlement effect: cocoa farmers = 34.4%.

2 Production linkages: no backward/forward linkages + the secondarysector has shrunk (-32%).

3 Consumption linkages: cocoa farmers = (i) 3/4 of regional pop-ulation change, (ii) are 30% wealthier than non-cocoa farmers, and(iii) spend 2/3 of their income on urbanizing goods. Large increasein regional urban expenditure → contribution of traders (33.1%) andpersonal services (17.6%).

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Rural-Urban Linkages Individual Channels

Rural-Urban Linkages: Old Cocoa-Producing Regions

1 Infrastructure: old cocoa-producing districts have today better infras-tructure along several dimensions: roads, electricity, water, hygiene,education, health and communications.

2 Natural increase: historical data on crude rates of birth and death inrural/urban Ivory Coast and Ghana→ small change in natality + lowermortality = urban demographic transition. Natural increase explainshalf of urban growth in the 1990s (migration before the late 1980s).

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The Future? Summary

African Cities as Powerful Engines of Growth?

Summary: agricultural exports → new and larger cities. But those are”consumption” cities (farmers, traders and service employees).

Additional results: cities of the old (and new) cocoa-producingdistricts have less manufacturing and are less economically diversified.Urban Dutch disease?

The future: resource exhaustion + urban demographic transition.Lower urban per capita income? Impact of ”consumption” cities vs.”production” cities on economic growth?

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The Future? Conclusion

Conclusion and Possible Research Agenda

Cash crop (and mining?) windfalls feed urbanization, but...

1 Small production linkages vs. large consumption linkages → ”con-sumption” cities of farmers, traders and service employees.

2 Impact of ”consumption” cities vs. ”production” cities on economicgrowth?

3 Cities highly dependent upon the production/price of primary com-modities?

4 Why missing manufacturing and tradable services in Africa?

5 Could the urban demographic transition be a curse for African cities?

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IntroductionMotivationThis Paper's Approach

Theoretical Discussion, Context and DataTheoretical DiscussionContextData

Econometric FrameworkLong-Differences ModelFixed Effects IV Model

Rural-Urban LinkagesSectoral Decomposition of Urban GrowthIndividual Channels

The Future?SummaryConclusion

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Agricultural Exports, Urbanization and African Growth: On ... · Agricultural Exports, Urbanization and African Growth: On Cocoa and Cities in Ivory Coast and Ghana ... change in