Labour Market Effects of Large-Scale Agricultural Investments

Labour Market Effects of Large-Scale Agricultural Investments

– Conceptual Considerations and Estimated Employment Effects –

IAMO Forum 2016

23 June 2016

Martin Ostermeier & Kerstin Nolte

Motivation

Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion 2

Increasing demand for land in low- and middle income countries

Source: The Land Matrix Global Observatory (retrieved May 6th, 2016).

Impact and implications for target countries heavily debated

Employment creation a key factor amongst community benefits

0

100

200

300

400

500

600

700

800

900

0

5.000

10.000

15.000

20.000

25.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Nu

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er

of

de

als

Are

a u

nd

er

con

trac

t (i

n 1

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s)

Area size under contract (N = 833 deals. 23.8 million ha in 2016)

Number of deals under contract

Research questions

Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion 3

What happens to the rural labour market if a commercial farm is set

up?

Does large-scale commercial farming lead to net employment

creation?

Methodology

Identify key determinants of the employment creation potential

Develop different scenarios in a transition matrix

Provide empirical estimates based on data

o Derive labour intensities of crops

o Estimate potential net employment effect

First round effects

Three determinants for employment creation potential

Former land use

Brownfield investment

Greenfield investment

Higher crowding out

Crop planted

Annual crop

Perennial crop

More labour intensive

Production model

Contract farming

Preserving employment opportunities

Conceptual framework

4 Motivation | RQ and methodology | Conceptual framework | Results | Next steps | Conclusion

Second round effects

Backward linkages

Established global players

Mostly in industrialised countries

Forward linkages

High export rates of unprocessed goods

Mostly to industrialised countries

Price effects, wage effects, …

Employment creation effect rather weak

Hardly any empirical evidence





Final land use

Former land use

Commercial farm

Perennial Annual

no CF CF no CF CF

Bro

wn

fiel

d

inve

stm

ent

Commercial agriculture 1a 1b 1c 1d

Gre

enfi

eld

inve

stm

ent

Smallholder agriculture 2a 2b 2c 2d

Pastoralists 3a 3b 3c 3d

Forestry 4a 4b 4c 4d

Conservation 5a 5b 5c 5d

Final land use Former land use

Commercial farm

Perennial crops (46%)

Annual crops (54%)

no CF CF no CF CF Total

Bro

wn

fiel

d

inve

stm

ent

Commercial agriculture

1a 1b 1c 1d

9% 4% 20% 7% 40%

Gre

en

fiel

d in

vest

men

t

Smallholder agriculture 2a 2b 2c 2d

11% 2% 11% 3% 28%

Pastoralists 3a 3b 3c 3d

2% 1% 2% 0% 6%

Forestry 4a 4b 4c 4d

9% 12% 2% 0% 23%

Conservation 5a 5b 5c 5d

3% 0% 0% 0% 4%

Total (%) 34% 20% 35% 10% 100%

(n=958)

Results – Transition Matrix (% of size under contract)


. Africa Latin America Asia Eastern Europe Oceania

Former use

Commercial agriculture 20% 50% 37% 80% 11%

Smallholder agriculture 29% 30% 42% 15% 59%

Pastoralists 4% 12% 3% 4% n/a

Forestry 41% 8% 9% n/a 30%

Conservation 5% 1% 9% n/a n/a

Crop Annual 31% 81% 16% 85% 17%

Perennial 69% 19% 84% 15% 83%

Production model

CF 29% 22% 23% 2% 3%

No CF 71% 78% 77% 98% 97%

Results – Regional focus (% of size under contract)


Results – Estimated commercial labour intensities (TOP crops)


0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 1,8 2

Wheat

Corn (Maize)

Soya Beans

Sugar Cane

Rice

0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 1,8 2

Rubber

Jatropha

Oil Palm

Coffee Plant

Banana

An

nu

al

Peren

nia

l

Results - Estimated labour intensities (annual vs perennial)


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23

La

bo

ur

inte

nsity in

work

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pe

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Annual Perennial

Annual vs. perennial crops

Labour intensity

Results – Estimated employment effect (preliminary)

11 Motivation | Goal and methodology | Conceptual framework | Results | Next steps | Conclusion

Target Country Smallholder employment

Commercial employment

Net employment effect

Ethiopia (LI_sh=5.2) 1,103,463 50,359 -90%

Kenya (LI_sh=2.5) 228,333 23,226 -63%

Malawi (LI_sh=3.1) 34,153 8,039 -15%

Nicaragua (LI_sh=0.4) 1,100 363 -67%

Source:

Commercial: The Land Matrix Global Observatory

Smallholder: FAO Data Portrait Smallholders

Improve quantification of net employment effect

Further differentiate in former use (e.g. crops planted, production model

applied, etc.)

How to identify/treat labour-intensive annuals and capital-intensive

perennials?

Better information on labour intensities of smallholder (e.g. by crop,

region, etc.) and other former greenfields

Assess magnitude of individual determinant

Elaborate/ quantify second round effects

Extend regional analysis

Assess quality of jobs created

E.g. compensation of income loss, type of employment, etc.

Next steps and open questions


Most large-scale agricultural investments…

Take place on greenfields

Plant annual crops

Do not apply contract farming schemes

Have weak linkages to other sectors

Regional differences

Africa, Asia and Oceania: mostly greenfield, perennial crops and no

contract farming

Latin America: half greenfield, mostly annual crops and no CF

Eastern Europe: mostly greenfield, mostly annual crops and no CF

Concluding remarks


Martin Ostermeier / Dr. Kerstin Nolte

GIGA German Institute of Global and Area Studies

Neuer Jungfernstieg 21 / 20354 Hamburg

Tel. +49-(0)40-42825-768

Email: [email protected]

Skype: Martin-Ostermeier

Homepage: http://www.giga-hamburg.de

Contact

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Labour Market Effects of Large-Scale Agricultural Investments

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