GENDER IMPLICATIONS OF BIOFUELS EXPANSION IN A LOW-INCOME AND LAND

ABUNDANT COUNTRYRui Benfica

Gender and Development Group, World BankChanning Arndt

University of Copenhagen and UNU-WIDER

The World Bank, Washington DC

OUTLINEI. MOZAMBIQUE’S POTENTIAL FOR BIO-FUELS PRODUCTION

II. WHAT DO WE KNOW ABOUT EFFECTS OF BIOFUELS EXPANSION?

III. STUDY OBJECTIVES

IV. GENDER IN MOZAMBICAN AGRICULTURE

V. METHODOLOGY

VI. BIOFUEL EXPANSION SCENARIOS AND MODEL RESULTS

VII. ALTERNATIVE POLICY OPTIONS

VIII. CONCLUSIONS

I. MOZAMBIQUE’S POTENTIAL FOR BIO-FUELS PRODUCTION

High interest in biofuels production due to a combination of mandates for use in developed countries and high oil prices

Mozambique is ideally suited for producing biofuels:

• 36 million hectares of arable land of which only 4.5 million is being used

Foreign biofuel investors are showing considerable interest in Mozambique:

• 20 million hectares of land have been requested from the government of which only a fraction is considered ‘credible’

• Most requests are for jatropha (biodiesel) and sugarcane (ethanol)

I. MOZAMBIQUE’S POTENTIAL FOR BIO-FUELS PRODUCTION

Production and market assessments for Mozambique are positive: • Mozambique is internationally competitive at oil prices above US$60 per barrel• Domestic market potential since oil and chemicals are 20% of imports

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Projection (AEO2010)

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Reference price

Price scenarios

II. WHAT DO WE KNOW ABOUT EFFECTS OF BIOFUELS EXPANSION?

Arndt, Benfica, Thurlow and Uaiene (2009). “Biofuels, Poverty and Growth in a Low-Income, Land-Abundant Setting: The case of Mozambique”, Environment and Development Economics

Biofuels expansion (sugar cane /ethanol and jatropha/biodiesel) generates growth and reduces poverty;

“Contract grower crop” (jatropha) compared to “plantation crop” (sugar cane) is more pro-poor (use of unskilled labor, land rents, technological spillovers)

Biofuels impose adjustments on households and other sectors due to resource competition (especially for labor in low population density Mozambique)

Appreciation of the exchange rate and competition for land forces substantial adjustment in export crops

III. STUDY OBJECTIVES?

To examine the macro and micro-level implications of expanding biofuels production in a low income and land abundant economy with a gender perspective

Focus on contract grower schemes in jatropha production and downstream processing

Investigate effects on growth, poverty, and food security of alternative female employment intensities in production

Identify and assess the effects of policy options to maximize broad-based benefits.

IV. GENDER IN MOZAMBICAN AGRICULTURE

Women play key role in agriculture, particularly in food crops

Barriers-to-entry in cash crops due to skills deficit, technology and limited access/control of resources

Women do plenty of household chores

Survey Data (Benfica, 2006, IAF2002/3) suggest significant differences in labor use patterns across activities, Labor income and expenditure shares by gender…

Patterns of Labor Use by Education-based Skills

SKILLED

SEMISKILLED

UNSKILLED

0 10 20 30 40 50 60 70 80

SKILLED

SEMISKILLED

UNSKILLED

0 10 20 30 40 50 60 70 80

Food Crops Livestock

Cash Crops Non-farm

SKILLED

SEMISKILLED

UNSKILLED

0 10 20 30 40 50 60 70 80

Production in all activities rely on unskilled labor, reflecting country’s skills shortage

SKILLED

SEMISKILLED

UNSKILLED

0 10 20 30 40 50 60 70 80

LABOR ALLOCATION IN ACTIVITIES BY SKILLS AND GENDER

Higher skilled labor relatively more used in off-farm activities and dominated by men

Non-Farm Activities

SKILLED

SEMISKILLED

UNSKILLED

0 10 20 30 40 50 60 70 80

23

22

44

4

3

4

MALE FEMALE

LABOR ALLOCATION IN ACTIVITIES BY SKILLS AND GENDER

(a) Food Crop Production

(b) Cash Crop Production

SKILLED

SEMISKILLED

UNSKILLED

0 10 20 30 40 50 60 70 80

8

8

32

3

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45

MALE FEMALE

SKILLED

SEMISKILLED

UNSKILLED

0 10 20 30 40 50 60 70 80

13

11

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26

MALE FEMALE

Male and female labor fairly balanced in agriculture, but women engage more in food crops and livestock while men dominate cash/export crops

Labor Income and Consumption Expenditure Patterns

All Rural Urban Male-headed

Female-headed

Bottom quintile

Top quintile

Population (1000) 18,302 12,431 5,871 14,549 3,753 3,661 3,660

Labor income (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Male 70.9 65.8 75.2 79.9 36.7 66.9 74.3 Female 29.1 34.2 24.8 20.1 63.3 33.1 25.7

Skilled 16.8 1.4 30.0 17.7 13.6 0.2 31.5 Semi-skilled 21.7 9.4 32.1 21.9 20.7 5.3 30.5 Unskilled 61.5 89.2 37.9 60.4 65.7 94.5 38.0

Consumption (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Foods 55.0 68.9 44.9 54.0 59.2 71.8 43.7 Nonfoods 45.0 31.1 55.1 46.0 40.8 28.2 56.3

Poverty rate (%) 54.1 55.3 51.5 51.9 62.5 n/a n/a

BIOFUELS EXPANSION AND GENDER Research finds that cash opportunities are typically taken by men

BUT with same resources, women can do well! SO, there are potential gains of engaging women in biofuels

Why would outcomes vary by gender? Women in biofuels may incur time-use trade-offs that affect welfare Skills shortage can affect maximization of women benefits

Implications for women to be determined by Level of direct involvement How it affects other sectors via resource competition and changes in relative

prices

V. METHODOLOGY

National CGE model and 2003 Social Accounting Matrix (SAM)

56 sectors (24 in agriculture) 8 Factors of production

Agricultural land Sex disaggregated labor (skilled, semi-skilled and unskilled) Sector-specific capital

20 Household groups Split by gender of household-head Rural/urban quintiles (2002/03 IAF household survey)

GENDER DISAGGREGATION IN THE CGE MODELGender/Skills Based Labor Splits and Households by Gender of the Head

Labor

Factors

CapitalLand

Unskilled Skilled

FemaleFemaleMale Female Male

Household Groups by Urban/Rural

Male headedQuintile 1Quintile 2Quintile 3Quintile 4Quintile 5

Female headedQuintile 1Quintile 2Quintile 3Quintile 4Quintile 5

Household Spending Patterns

Semi-Skilled

Male

MODEL SPECIFICATION

Agent behavior and factor market closures Producers maximize profits and consumers maximize utility Fully employed and mobile land and labor Fully employed and activity specific capital

Macro Closures Savings-driven investment Fixed current account balance (flexible Exchange Rate) G is fixed and fiscal deficit adjusts

Recursive dynamic (12 time periods: 2003-2015) Endogenous updating of investment/capital Exogenous updating of population, land, labor supply

CGE Model linked to micro-simulation module

VI. BIOFUEL EXPANSION SCENARIOS AND MODEL RESULTS

BASELINE AND BIO-FUELS EXPANSION SCENARIOS

MODEL RESULTS EFFECTS ON GDP AND SECTORAL GROWTH EFFECTS ON WAGES AND LAND RENTS EFFECTS ON HOUSEHOLD POVERTY

BASELINE AND BIO-FUELS EXPANSION SCENARIOS

BASELINE SCENARIO

Does not include Bio-fuels sector/Basis for comparison Economy grows (2003-2015) in line with past performance

Each year, model updates population, labor and land supply and factor productivity

Supply and productivity of unskilled slower than more skilled Hicks-neutral technical advance at 3.0 for non-agriculture and

0.8 for agriculture Endogenous determination of sector growth, changes in

employment and household income All this results in a GDP growth of 4% per year

BASELINE AND BIO-FUELS EXPANSION SCENARIOS

GENDERED BIOFUELS EXPANSION SCENARIOS

New biofuels sector for jatropha feedstock and biodiesel production

Land for feedstock production = 550,000 hectares in a 12-year horizon 50% on land used by other crops (displacement) plus 50% on new land Sector completely foreign financed and export oriented

Three Scenarios based on the intensity of female employment in the

biofuels feedstock and downstream processing sectors: 20% 50% 80%

EXPANSION OF BIOFUELS IMPACT GDP

Initial share, 2003 (%)

Baseline growth rate

(%)

Deviation from baseline (%-point)Female employment scenarios20% 50% 80%

Per capita real GDP 100.00 3.95 0.24 0.27 0.28

Agriculture 25.92 1.90 1.47 1.37 1.25 Food crops 17.72 1.38 -0.08 -0.22 -0.39 Export crops 1.50 1.48 -2.32 -2.27 -2.23 Biofuel feedstock 0.00 0.00 n/a n/a n/a Other agriculture 6.71 3.24 -0.55 -0.65 -0.80

Industry 23.15 4.34 0.50 0.58 0.66 Food processing 5.46 3.78 -0.40 -0.42 -0.47 Biofuel processing 0.00 0.00 n/a n/a n/a Other industry 17.69 4.51 0.23 0.35 0.46

Services 50.93 4.68 -0.39 -0.33 -0.29

Source: Mozambique CGE model results.

BIG DROP IN EXPORT CROPS DUE TO RESOURCE COMPETITION AND EXCHANGE RATE EFFECTS

Base=2003 Baseline 20% 50% 80%0

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Growth in Cash Crops Real Exchange Rate

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Area devoted to other export crops is halved relative to baseline Appreciated exchange rate lowers competitiveness of non-biofuels exports Outcome unaffected by female intensity in biofuels

FEMALE INTENSITY IN BIOFUELS THREATENS HOUSEHOLD FOOD SECURITY

Base=2003 Baseline 20% 50% 80%0

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Growth in Food Crops Cereals Price Index

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Decline in food production due to biofuels generally, but larger when more female intensive production – women moved from food crops!

FEMALE INTENSIVE BIOFUELS WOULD NARROW THE GENDER WAGE GAPAnnual wage,

2003Baseline

growth rate (%)

Deviation from baseline, 2015 (%-point)Female employment scenarios20% 50% 80%

Labor wages (US$) 737 2.40 0.06 0.03 -0.01

Skilled labor 4,835 1.48 -0.27 -0.47 -0.67 Male 5,175 1.44 -0.24 -0.63 -1.05 Female 3,637 1.68 -0.38 0.28 0.97

Semi-skilled labor 1,316 1.35 -0.06 -0.27 -0.49

Male 1,423 1.15 0.00 -0.59 -1.29 Female 986 2.22 -0.30 0.92 2.13

Unskilled labor 532 2.71 0.19 0.25 0.31 Male 621 1.15 0.36 -0.15 -0.71 Female 425 4.95 -0.02 0.71 1.38

Land rental rates - 5.99 1.37 1.21 0.94Domestic capital returns - -2.23 -0.47 -0.74 -1.02

BIOFUELS CAUSES POVERTY TO FALL, ESPECIALLY AMONG FEMALE HEADED HOUSEHOLDS

Source: Mozambique CGE model results.

Baseline scenario poverty rates (%) Deviation from baseline, 2015 (%-point)Female employment share

2003 2015 20% 50% 80% (1) (2) (3)

National 54.07 30.94 -4.62 -4.66 -4.53

Male-headed 51.90 30.46 -4.56 -4.05 -3.21Female-headed 62.46 32.82 -4.88 -7.03 -9.67

Rural areas 55.29 30.22 -5.27 -5.22 -4.84 Male-headed 53.47 30.10 -4.96 -4.67 -3.91 Female-headed 62.85 30.74 -6.58 -7.52 -8.70

Urban areas 51.47 32.46 -3.25 -3.48 -3.87 Male-headed 48.44 31.25 -3.68 -2.69 -1.64 Female-headed 61.76 36.56 -1.82 -6.14 -11.41

Source: Mozambique CGE model results.

Baseline causes national poverty to fall from 54% to 31%. Under Biofuels national poverty to falls even further Female-headed HHs benefit most when women are employed in biofuels BUT female intensity does not lead to larger reductions in national poverty

WHY DOESN’T NATIONAL POVERTY FALL WITH FEMALE INTENSIVE BIOFUELS EXPANSION?

Cereals and food prices increase more in female intensive scenarios => reduces real incomes of the poor who are net food buyers.

Poorer households are more likely to be endowed with semi-skilled male labor than similarly skilled female labor => benefited

households are not the poorest.

Urban areas are more endowed than rural with semi-skilled female labor => Female urban (not poor female rural) benefit more from increases in wages.

VII. ALTERNATIVE POLICY OPTIONS

1. Improving female workers’ educational attainment to maximize their returns as wage earners and strengthen poverty reduction Simulation assumes 80% female employment intensity and a

quarter of semi-skilled and skilled needed to produce biofuels come from upgrading unskilled workers to at least primary school

2. Enhancing productivity of food crops to offset declining growth in food production – extension investments, etc Simulation assumes 80% female employment intensity plus

an increase in food crop productivity of 6% over 2003-15

IMPROVING FEMALE WORKERS’ EDUCATION LEVELS WILL MAXIMIZE THEIR RETURNS AS WAGE EARNERS AND …

This policy reduces upward pressure on female worker’s wages

At 80% female employment expansion semi-skilled female wages increased 2.1%, and only 0.6% with the education scenario

BUT net effect is still a rise in average wages, as more women benefit from skills premium earned by higher educated workers

Poorer households benefits the most as they are the ones currently lacking skills

… AND STRENGTHEN POVERTY REDUCTION IN RURAL AREAS AND NATIONALLY

Baseline 80% Female Education Policy25

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Relative Poverty Reduction: Female Rural/Urban

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Increase in relative poverty reduction gains of rural female-headed households over their urban counterparts

GDP grows and National poverty also falls with this policy However, NO Effects on food security

ENHANCING PRODUCTIVITY OF FOOD CROPS CAUSES GDP TO GROW AND OFFSETS DECLINING FOOD PRODUCTION AND HIGHER

PRICES

Basel

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VIII. CONCLUSIONS Expanding biofuels production can accelerate growth and reduce poverty

irrespective of gender intensity

If current gender roles in food crop production persist, employing women intensively causes food production to contract due to trade-offs between biofuels and food crops

Shortage of higher-skilled female labor in rural areas constrains the poverty reducing effects of employing women intensively in biofuels

Any strategies to increase the role of women in biofuel expansion needs to be combined with policies aimed at raising women’s education and increasing food crop productivity.