Organization and Performance of Cotton Sectors in Africa ... - infoDev

chosen in this book and the impact of the cotton sector on poverty within agiven country.Beginning at the farm level, increasing profitability of cotton production forfarmer households does not guarantee poverty reduction, but it should contributeto it. Directly, the incomes of cotton farmers (many of who may startpoor) increase. Indirectly, higher profitability of cotton production shouldencourage more hiring of labor, while higher incomes should set off consumptionmultiplier effects within the local economy. As profitability of cottonproduction increases, it may also encourage more households to engage in cottonproduction. However, the impact on household incomes may be quitesmall, unless the cotton sector is able to sustain a higher rate of productivitygrowth over time relative to competing crops and activities.At the macro level, a healthy cotton sector should also contribute to economicgrowth and, thereby, to poverty reduction. It creates value within theeconomy, has backward and forward links to input supply and textile industries,generates foreign exchange, and should generate tax revenue for the state thatcan be used for subsequent investment.Selected IndicatorsTable 4.2 summarizes the key indicators of cotton sector performance that willbe explored within the book and the ways each indicator will be measured.Table 4.3 summarizes predictions about how different sector types willperform as measured by these indicators. Predictions are clearer for theprocess indicators and for the intermediate outcome indicators (yield andcompany cost efficiency) than for the final outcome indicators. There are tworeasons: First, existing work (Poulton et al. 2004) has focused more onprocess indicators than on outcome, indicators. Second, more than oneprocess can contribute to an outcome and a particular sector type may beexpected to perform strongly in one of the processes but poorly in another.This difference is seen most clearly in the case of farmer welfare, wherereturns per day of family labor are influenced by yields (in which coordinatedsectors are expected to outperform competitive) and by seed cottonpricing (in which competitive sectors are expected to outperform coordinated).In table 4.3, therefore, “no clear prediction” means that this is anempirical question worthy of additional research.This study suggests that performance on input credit and extension islikely to be correlated across sector types: sectors performing well comparedwith other sector types on input credit are likely to perform well on extension.This correlation is in large measure due to the complementarity of thetwo activities, which stems from two sources. First, agents delivering inputsneed to transmit at least some minimum level of knowledge of how to usethe inputs so that the company recoups reasonable value (in the form ofincreased production) from the investment. Second, extension work can56 POULTON AND TSCHIRLEY