Assessing the impacts of productivity growth on poverty involves a number of steps. The purpose of this short paper is to lay out the steps involved as a basis for making such an evaluation in a small economy such as Rwanda. This impact occurs through several channels, and capturing it requires that we take into account, in particular: (i) the direct impacts of productivity growth on those farmers who choose to adopt a higher-productivity approach to production; (ii) the impacts of higher productivity on the prices of food paid by the poor and the near-poor, and (iii) the impacts of higher productivity on the factor prices, and particularly the wages received for unskilled labour.
Clearly, any analysis of the implications of productivity change must take into account a combination of changes at the individual farm level—such as the impacts of changes in productivity on farm output and the revenues from production. But, particularly in a small economy such as Rwanda, the analysis must take into account economy-wide impacts such as the impacts on food prices and on factor prices paid to low-income workers. To do this requires a combination of economy-wide modelling and detailed household analysis. The purpose of this paper is to explore ways in which this might be done in a rigorous way, guided by the available data and modelling approaches.