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Cities and Agricultural Transformation in Ethiopia
April 1, 2016
Due to the rapid growth of cities in Africa, a larger number of farmers is living in the rural hinterland providing food to urban residents. However, empirical evidence on how urbanization affects these farmers is scarce. To fill this gap, this analysis explores the relationship between proximity to a city and the production behavior of rural staple crop producers. More in particular, we analyze unique data from teff producing farmers in major producing areas around Addis Ababa, the Ethiopian capital. We find that farmers more closely located to Addis Ababa receive higher teff prices, but also face higher wages and land rental prices and rely significantly more on formal factor markets. Moreover, we observe that modern input use, land and labor productivity, and profitability in teff production improve with urban proximity. In contrast, we do not find such strong and positive relationships of rural population density increases – as an alternative source of agricultural transformation – as they seem to lead to immiserizing effects in these settings.