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March 2000 - Policies to foster accumulation of the assets needed for agricultural production (including draft animals and implements) and to provide complementary public goods (education, credit, and good agricultural extension services) could greatly help reduce poverty and improve productivity in Zambia. Deininger and Olinto use a large panel data set from Zambia to examine factors that could explain the relatively lackluster performance of the country's agricultural sector after liberalization. Zambia's liberalization significantly opened the economy but failed to alter the structure of production or help realize efficiency gains. They reach two main conclusions. First, not owning productive assets (in Zambia, draft animals and implements) limits improvements in agricultural productivity and household welfare. Owning oxen increases income directly, allows farmers to till their fields efficiently when rain is delayed, increases the area cultivated, and improves access to credit and fertilizer markets. Second, the authors reject the hypothesis that the application of fertilizer is unprofitable because of high input prices. Rather, fertilizer use appears to have declined because of constraints on supplies, which government intervention exacerbated instead of alleviating. (Extending the use of fertilizer to the many producers not currently using it would be profitable, but increasing the amount applied by the few producers who now have access to it would not be.) Policies to foster accumulation of the assets needed for agricultural production (including draft animals and implements) and to provide complementary public goods (education, credit, and good agricultural extension services) could greatly help reduce poverty and improve productivity. This paper - a product of Rural Development, Development Research Group - is part of a larger effort in the group to analyze determinants of rural growth and market participation. The authors may be contacted at kdeininger@worldbank.org or polinto@worldbank.org.

Cred Demand --- Economic Theory and Research --- Exports --- Finance and Financial Sector Development --- Financial Literacy --- Fiscal Policies --- GDP --- Goods --- Inputs --- Labor Policies --- Macro-Economic Policies --- Macroeconomics and Economic Growth --- Markets --- Markets and Market Access --- Overvalued Exchange Rates --- Ownership --- Prices --- Production --- Production Function --- Productive Assets --- Productivity --- Risk Aversion --- Social Protections and Labor --- Subsidies --- Total Factor Productivity --- Welfare