Farm-nonfarm growth linkages in Bangladesh

Project Active from to Firms and Farms

Amid historically high food prices agriculture has made a comeback to the centre stage supported by donor resources in the backdrop of national governments’ renewed emphasis on achieving food security for their populations. While this reinvigorated approach to agricultural development is attractive as a majority of poor people still rely on farm activities for their livelihoods with poverty reduction remaining the most important policy objective, there are concerns about low productivity of the sector along with its role in the process of development.

This paper sheds some light on this debate by providing empirical evidence on farm-nonfarm growth linkages in the context of Bangladesh. By using time series data on sectoral outputs and cointegration techniques, it finds positive and statistically significant contribution of agriculture to overall and nonfarm output growth. The estimated ‘spillover/externality’ effects are found to be robust and consistent under different specifications. An important policy lesson that follows is that an agriculture-focussed development strategy may not compromise with a growth maximising objective while making a powerful dent in poverty incidence.