Roles of Agricultural Transformation in Achieving Sustainable Development Goals on Poverty, Hunger, Productivity, and Inequality

This paper examines the role of the transformation of the rural agricultural sector in achieving Sustainable Development Goals (SDGs) 1, 2 and 10 drawing upon the cross-country panel data over the past four decades for 105 developing countries. We define agricultural transformation by three different indices, namely, (i) the agricultural openness index – the share of agricultural export in agricultural value added of the country, (ii) the commercialization index - the share of processed agricultural products, fruits, green vegetables, and meats in all primary and processed agricultural products, and (iii) the product diversification index to capture the extent to which the country diversify the agricultural production. Drawing upon the dynamic panel model, we have found that transformation of the agricultural sector in terms of agricultural openness has dynamically increased the overall agricultural productivity and its growth and has consequently reduced national, rural and urban poverty significantly. We have also found that agricultural openness tends to significantly alleviate child malnutrition, namely underweight and stunting, and improve food security in terms of energy supply adequacy, protein supply, lack of food deficit and reduction of the prevalence of anaemia among pregnant women. The agricultural openness is found to be negatively associated with the Gini coefficient at both national and subnational levels (for both rural and urban areas). Except for Latin America, product diversification reduces agricultural productivity, implying the efficiency gains from economies of scale of fewer crops. On the other hand, we argue that the commercialisation does not generally increase the agricultural productivity and this may be related to a positive effect of the higher share of cereal production on productivity observed in Sub-Saharan Africa and Latin America. It has been suggested that policies improving the efficiency of agricultural production, for example through better rural infrastructure, or promoting agricultural exports, through regional economic integrations or reducing transaction costs such as tariff and non-tariff barriers, would help to achieve SDGs 1, 2 and 10 indirectly through the productivity improvement. However, a separate policy to support the poorest below the US$1.90 a day poverty line is also necessary for achieving SDG 1.