Abstract:

All developing countries experience a process of rural transformation (RT), and the evidence available to date says that economies that transform their rural sectors more rapidly achieve faster growth and are also more inclusive.  However, not all countries are successful.  This special focus contains five papers related to the nature of rural transformation, its components, and consequences.¹

All authors respond to the proposition that understanding the nature and impact of RT is essential for policymakers, because of their role in its success.  A theme of the collection is the regional diversity in the experience of rural transformation and the value of the design of region-specific policies.

Wang et al. (2023) provide a comprehensive analysis of the concept of RT, its measurement, and the various indicators used in related studies.  They adopt a definition of RT that is more extensive than the simple transformation of agriculture but also retains a focus on the rural economy (and, therefore, is a subset of the structural transformation of the whole economy).  They refer to the text of the definition by IFAD (2016, p. 23) as involving ‘rising agricultural productivity, commercialisation and diversification of production patterns and livelihoods,’ which also involves expanded off-farm employment.   The process also has consequences for inclusion and sustainability.

A feature of RT is the greater use of markets for outputs such as high-value crops and inputs such as labour.  The development of markets in complementary services, such as transport and storage, also supports the use of output markets.  The authors note that RT involves significant changes in rural areas, including shifts in farming practices, land use, population movements, and interactions between primary and other sectors.   

Given all its dimensions, the measurement of RT is a challenge. Current methods and indicators are often insufficient for policy decision-making due to a lack of objectivity, feasibility, accountability, comprehensiveness, and comparability. This study reviews various indicators, such as those referring to components including labour productivity, commercialisation, diversification, inclusiveness, and sustainability. The authors argue that future research could develop more effective measures to assess RT, especially in developing countries, and they review a range of options for further attention.

Shi and Huang (2023) examine the dynamic relationship between RT and its consequences.  They concentrate on its impacts on income growth, and poverty reduction across different regions in China over the past 40 years. The study uses provincial-level data to form indicators of RT.  Specifically, they assess how shifts from traditional agriculture to high-value agriculture (RT₁) and the rise of non-farm employment (RT₂) have impacted rural income and poverty.  These indicators are commonly used in papers in the research project from which this collection is drawn.

The study finds: 1) a positive correlation between both aspects of RT and per capita rural income. While both RT₁ and RT₂ have resulted in a significant increase in rural income, RT₁’s impacts occur more in the later stage than early stage of RT, and RT₂’s impacts happen in every stage of RT.  2) RT₁ and RT₂ have significantly contributed to the reduction of rural poverty.  The effect of RT₁ is more dominant in the early stages of RT, while RT₂ becomes more influential in later stages.  3) The level and speed of RT, along with its effects on income and poverty, vary considerably across regions. Eastern provinces, which are more economically developed, show higher levels of RT and better outcomes in terms of income growth and poverty reduction than other regions.

The findings suggest the importance of targeted policies that promote high-value agriculture and expand rural non-farm employment according to the stage of transformation. And the paper also emphasizes the value of region-specific strategies and policies.

Sudaryanto et al. (2023) explore the impact of RT on household income and poverty in Indonesia over the last 20 years.

They report that RT in Indonesia has been characterized by rapid agricultural growth, particularly in the production of horticulture, estate crops, and livestock, which has surpassed the growth in grain production.  This shift reflects farmers’ orientation from subsistence to market-driven production.  Additionally, there has been an increasing engagement of rural laborers in non-farm employment, contributing to the diversification of rural economies.

Then, using data from 34 provinces in Indonesia from 2000 to 2020, they find growth in both RT₁ and RT₂, with each also positively associated with the growth of rural household income and a decrease in poverty rates. However, they find that the speed of this structural transformation and its consequences varies across regions.

However, there are regional disparities: Regions with a higher level of RT, like those centred around major cities such as Medan and Jakarta, show a more significant increase in household income and a more pronounced reduction in poverty. In contrast, less developed regions, especially those in Eastern Indonesia, face more significant challenges in reducing poverty.  

Policies aimed at improving rural income and reducing poverty should integrate, the authors of the Indonesia paper argue, approaches promoting high-value agriculture and expanding rural non-farm employment, but also pay special attention to regional situations and adopt a contextual policy framework that considers regional diversification in natural resources endowments as well as socio-cultural aspects.

Abedullah et al. (2023) explore the role of RT in enhancing rural per capita income and reducing poverty in Pakistan from 1981 to 2019.  The research uses district-level data to measure RT₁ and RT₂.  The authors find that: 1) Both RT₁ and RT₂ positively affect rural per capita income, with RT₁ having a more pronounced impact than RT₂ (as in the case of China).  2) Both RT₁ and RT₂ are effective in reducing rural poverty, but RT₂ becomes more in the later stages of rural development (as also the case in China).  3) Significant regional disparities occur in the process and impact of RT. Districts at advanced stages of RT positively correlate with increased income and reduced poverty rate (as was also found in both China and Indonesia).

We noted RT’s contribution to inclusion generally, but another important element of the work completed to date is attention to RT’s gender inclusiveness.  Rola-Rubzen et al. (2023) systematically review 84 studies from 1960 to 2021 to understand how RT affects gender indicators and how gender inclusiveness influences RT.

RT significantly impacts women’s work, income, empowerment, wellbeing, and time allocation. It leads to positive outcomes for women, such as increased employment and empowerment opportunities, but also introduces challenges, including unstable income sources and increased workloads.

Due to RT, women are working more, including greater involvement in both on-farm labour and off-farm or non-agricultural employment. While this shift can improve women’s livelihoods, it also results in complexities such as wage discrimination and job insecurity.

The stability of the additional income associated with RT is questionable. Shifts towards high-value agricultural commodities, for example, contribute to reduced income stability. Moreover, women’s increased income does not always equate to increased control over household financial resources.

RT can enhance women’s empowerment, mainly through increased educational opportunities for girls and improved income. Nevertheless, shifts to high-value agriculture sometimes reduce women’s control over income and resources, indicating a complex interplay between RT and empowerment.

In summary, these papers find a positive association of the indicators of rural transformation (high-value products and off-farm employment) with rural income growth and poverty reduction, but with differential impacts at different stages of development.  All studies also finds significant regional variation in performance.

These studies recommends targeted policies to enhance high-value agriculture and expand rural non-farm employment but with region-specific strategies.  The research also highlights the challenges in implementing effective RT strategies, such as land distribution inequalities, credit market limitations, and access to modern agricultural techniques.

The work has led to discussion of policy options that might accelerate rural transformation.  The next step is to systematically consider the drivers of the changes in rural transformation indicators.  The framework applied in the project from which these papers are drawn pays attention to institutions, policies, and investments (IPIs).  Each component of the IPIs is likely to contribute to both RT₁ and RT₂ to varying degrees.  The study of the association of elements of the IPIs with the indicator and, thereby, the outcomes of RT is a topic of current research.  However, some work on the relevant components of the IPIs has been published for the case of China (Huang 2022), which provides direction for this research.  

Relevant institutions, for example, include the conditions of access to land (the development of land markets, in other words) and markets for water and labour.  Markets that support the application of mechanisation are also expected to be essential, as will other markets for complementary services.  Various policies will also influence the emergence of new markets (Barrett et al. 2022).  

Other relevant policies include those affecting incentives faced by rural households, including price regulation, trade policy management, and applying taxes and subsidies.  Sometimes, these linkages also operate in both directions (from policy to RT and back again): an example is trends in trade policy (Anderson 2023) and foreign direct investment (Hu et al. 2023).

Examples of investments include those related to infrastructure (such as roads or irrigation) and technology (through systems of research and development applied to agriculture). As noted, these are topics for further work, intending to map the priorities among the IPIs for accelerating RT depending on its current stage and regional context.  

While RT generally leads to positive outcomes for women, it also presents risks and challenges.  Future RT policies and programs should be more gender-inclusive to maximize benefits for women and further RT itself.  These are critical elements of the larger package of IPIs.