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ASRB NET and ARS / SMS / STO recruitment Agricultural Development & Policy Analysis: practice questions

ASRB NET and ARS / SMS / STO recruitment · India · Agricultural Scientists Recruitment Board (ICAR)

Original practice questions written to the published syllabus · not past papers
10worked here, free
71written to this exam in this subject
14syllabus units

What this subject covers

The part agriculture plays in economic development, the classic theories of that role, and how price, land, credit, research, trade and subsidy policy are made and judged.

In the exams: agricultural economics PhD entrance and fellowship examinations, agricultural development and policy (heavy); agricultural development bank officer recruitment, economic and social issues (heavy); agricultural scientist eligibility tests, agricultural development and policy (heavy)

Where the 71 questions fall

How our questions for ASRB NET and ARS / SMS / STO recruitment spread across the units of Agricultural Development & Policy Analysis. Difficulty: 24 easy, 39 medium, 8 hard.

Lewis and Fei-Ranis models8
Trade and subsidy policy8
Performance of agriculture across world regions7
Research and development policy7
Role of agriculture in economic development5
Schultz and Mellor on agricultural transformation5
Land policy5
Water, energy and environment policy5
Induced innovation4
Price policy and minimum support prices4
Credit policy4
Poverty and inequality4
The policy process and implementation3
Food and nutrition security2

10 practice questions, worked

Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.

1 · Lewis and Fei-Ranis models · medium

In the Fei-Ranis model, which statement describes phase two?

  1. Marginal product of farm labour is zero and output does not fall when workers leave
  2. Marginal product of farm labour exceeds the institutional wage and agriculture is commercialised
  3. The terms of trade move in favour of industry because food becomes abundant
  4. Marginal product of farm labour is positive but below the institutional wage, so the average surplus per migrant falls and industrial wages must rise
Answer and working

D. Marginal product of farm labour is positive but below the institutional wage, so the average surplus per migrant falls and industrial wages must rise

In phase two, each migrant takes away some output, so less food is left per migrant than the institutional wage; food prices rise, the terms of trade turn against industry (in favour of agriculture), and the industrial wage rises. Zero marginal product is phase one; marginal product above the wage is phase three.

Further reading: Fei and Ranis (1964)

2 · Lewis and Fei-Ranis models · medium

A traditional farm sector has 500 workers producing 1,000 units of grain; each is paid the institutional wage equal to the average product. In Fei-Ranis phase one, 100 redundant workers move to industry and output does not change. What total agricultural surplus is now available to feed the migrants?

  1. 0 units
  2. 200 units
  3. 800 units
  4. 1,000 units
Answer and working

B. 200 units

Institutional wage = 1,000/500 = 2 units. After migration, the remaining 400 workers consume 400 x 2 = 800 units, leaving 1,000 - 800 = 200 units, i.e. 2 units per migrant, exactly the institutional wage, which is the defining feature of phase one. 800 is what the remaining workers eat, not the surplus. 0 recomputes the wage as the new average product (1,000/400 = 2.5), so the remaining workers eat everything.

Further reading: Fei and Ranis (1964)

3 · Schultz and Mellor on agricultural transformation · medium

According to Schultz, the key to transforming traditional agriculture is

  1. collectivising farms to reap economies of scale
  2. raising savings to buy more of the traditional inputs
  3. keeping farm prices low to transfer surplus to industry
  4. supplying new high-payoff modern inputs and investing in farmers' education and skills
Answer and working

D. supplying new high-payoff modern inputs and investing in farmers' education and skills

Because the return to more traditional inputs is low, Schultz saw transformation coming from new, profitable inputs (improved seed, fertiliser) plus human capital so farmers can use them, largely supplied by public research and extension. He also opposed keeping farm prices artificially low, arguing farmers respond to incentives.

Further reading: Schultz (1964)

4 · Induced innovation · medium

Hayami and Ruttan explain Japan's agricultural growth path from about 1880 as mainly

  1. biological and chemical innovation raising yield per hectare, as land was expensive relative to labour
  2. mechanical innovation raising land area per worker, because labour was expensive relative to land in Japan
  3. expansion of cultivated area, because land was cheap
  4. imported tractor technology, because capital was abundant
Answer and working

A. biological and chemical innovation raising yield per hectare, as land was expensive relative to labour

Japan had scarce land and abundant labour, so the high land/labour price ratio induced land-saving technology: fertiliser-responsive varieties and irrigation. The mechanical, labour-saving path describes the United States.

Further reading: Hayami and Ruttan (1971, 1985)

5 · Price policy and minimum support prices · medium

Compared with a support price backed by government procurement, a deficiency (price-gap) payment

  1. raises the market price for all buyers and requires public storage
  2. is financed by consumers rather than by the budget
  3. pays farmers the gap between a target price and the market price without the state buying the crop, so consumers face the lower market price
  4. requires import quotas to be effective
Answer and working

C. pays farmers the gap between a target price and the market price without the state buying the crop, so consumers face the lower market price

Under a deficiency payment the market price finds its own level and the budget pays the gap, so consumers gain and there are no stocks to hold. Procurement at a support price raises the market price and requires storage and disposal.

Further reading: Timmer, Falcon and Pearson, Food Policy Analysis, 1983

6 · Research and development policy · medium

Zvi Griliches's pioneering study of the social returns to agricultural research concerned

  1. hybrid corn in the United States
  2. semi-dwarf wheat in Mexico
  3. IR8 rice in the Philippines
  4. cotton in India
Answer and working

A. hybrid corn in the United States

Griliches (Journal of Political Economy, 1958) estimated the social return to research on hybrid corn, and his earlier work studied its diffusion. It became the model for later returns-to-research studies.

Further reading: Griliches (1958)

7 · Trade and subsidy policy · hard

Under the Uruguay Round Agreement on Agriculture, developing countries were to reduce bound agricultural tariffs by an average of

  1. 36% over six years, with at least 15% per tariff line
  2. 24% over ten years, with at least 10% per tariff line
  3. 20% over six years
  4. 13.3% over ten years
Answer and working

B. 24% over ten years, with at least 10% per tariff line

Developing countries: 24% average, minimum 10% per line, over ten years. 36% with a 15% minimum over six years was the developed-country commitment; 20% and 13.3% are the AMS reduction commitments for developed and developing countries.

Further reading: WTO Agreement on Agriculture

8 · Poverty and inequality · medium

Five people have incomes of 60, 80, 120, 150 and 200, and the poverty line is 100. What is the poverty gap index (FGT with alpha = 1)?

  1. 0.30
  2. 0.40
  3. 0.04
  4. 0.12
Answer and working

D. 0.12

The poor are 60 and 80 with normalised gaps 0.4 and 0.2. PG = (0.4 + 0.2)/5 = 0.12, dividing by the whole population. 0.30 averages the gaps over the poor only; 0.40 is the headcount ratio (2/5); 0.04 is the squared poverty gap.

Further reading: Foster, Greer and Thorbecke, Econometrica 1984

9 · The policy process and implementation · medium

Michael Lipton's 'urban bias' thesis (Why Poor People Stay Poor, 1977) argues that

  1. cities are biased against industrial investment
  2. rural elites capture most public spending, leaving urban workers under-served and heavily taxed
  3. urban consumers pay too much for food because governments keep farm prices high to please rural voters
  4. political power concentrated in cities leads developing-country governments to neglect and tax agriculture
Answer and working

D. political power concentrated in cities leads developing-country governments to neglect and tax agriculture

Lipton argued that urban classes - industrialists, workers, officials - shape policy to keep food cheap and channel investment to cities, starving agriculture where most of the poor live.

Further reading: Lipton (1977)

10 · The policy process and implementation · easy

India's three farm laws enacted in 2020 to liberalise trade outside regulated markets, contract farming and stock limits were

  1. upheld and implemented nationwide from 2021
  2. converted into state laws in 2022
  3. repealed in 2021 after prolonged farmer protests
  4. replaced by the National Food Security Act
Answer and working

C. repealed in 2021 after prolonged farmer protests

Parliament repealed the three Acts in 2021. The episode is used to show that reform design must address trust, consultation and the distribution of gains, not only efficiency.

Further reading: Farm Laws Repeal Act, 2021

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Agricultural Development & Policy AnalysisThe full study manual, free ASRB NET and ARS / SMS / STO recruitmentFormat, sections and how it has changed

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