7ER


 Discussion Paper 82
Pathways of Rural Development in Madagascar: An Empirical
 Investigation of the Critical Triangle of Environmental
 Sustainability, Economic Growth, and Poverty Alleviation
 Manfred Zeller, C6cile Lapenu, Bart Minten, Eliane Ralison,
 Ddsir6 Randrianaivo, and Claude Randrianarisoa


Most of the world's poor depend directly or
 indirectly on agriculture for their liveli-
 hood. Much-needed increases in agricul-
tural production can, in principal, come about through
two pathways of rural development: expanding the area
under cultivation or increasing the yield of areas
already under cultivation. The first-agricultural
extensification-does not require increases in agricul-
tural productivity. The second is called agricultural
intensification. What causes rural communities to
choose between the two, and how can policy help
communities achieve environmentally sustainable
pathways of development while at the same time
improving incomes and alleviating poverty? This paper
seeks to shed some light on these complex questions
using a descriptive and econometric analysis of
community-level data from Madagascar.
 The point of departure for the
analysis is a theoretical frame- "Access to
work that postulates a critical tri-
angle between economic growth, institutions,
poverty alleviation, and environ- village banks
mental sustainability. The de- cooperate
scriptive analysis of community- significa
level data from 200 villages in
rural Madagascar shows that the agricultut
yields of irrigated rice (the major Mad
food crop) and agricultural wages
declined from 1987 to 1997,
while the villages expanded their upland area at the
expense of forestlands and the fertility of their upland
soils. This paper presents an econometric anal-ysis of
the determinants of sustainable rural devel-opment that
seeks to explain three types of observed development
paths: (1) agricultural extensification with
corresponding deforestation and soil mining,


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(2) agricultural intensification, and (3) rural migration.
The results show that improved access to commodity
and financial markets and to public services as well as
a higher level of social capital in the village can act as
determinants that favor more sustainable development
paths for use of natural resources.
 The analysis in this paper points to a number of
 implications for policy and further research. Access to
 member-based financial institutions, such as credit
 groups, village banks, or savings and credit coop-
 erative societies, plays a significant role in enabling
 agricultural intensification in Madagascar and the
 promotion of microfinance institutions for rural house-
 holds could have beneficial effects on agricultural
 productivity, poverty, and the conservation of natural
 resources.
 The research further suggests a positive effect of
 improved access to
 markets for rice and
er-basedfinancial agricultural inputs on rice
as credit groups, yields, upland soil fertility,
savings and credit and the reduction of newly
cities, plays a cultivated hillsides. Yet,
le in enabling improved access to output
 markets for nonrice crops
tensification in that are grown on upland
car ... seems to lead to an expan-
 sion of cultivated upland
 in the short run. As such
 market access increases, farmgate prices increase while
 farmers' transaction costs for selling and buying crops
 decrease, ultimately pushing up the value of land.
 Investments in soil conservation will conse-quently
 become more economical. Neglecting the build-up of
 rural infrastructure and markets would only condemn
 rural villages and households to con-tinue the low-


Food Consumption and Nutrition Division of the International Food Policy Research Institute