Since the diffusion of innovations among producers is neither automatic nor rapid, agricultural extension services are an essential link between the generation of innovations by R&D and their adoption at the farm level. Poverty represents a further obstacle to the adoption of new agricultural technologies, especially in LDCs. Human capital plays a major role in technology adoption, affecting the use and combination of inputs by farmers. Education contributes to the acquisition and assimilation of information, and to the learning, mastery and implementation of technologies. There is increasing recognition of the importance of public policies to agricultural productivity, through spending on R&D, extension services and education, investment in “hard” (physical) infrastructure, “soft” (institutional) infrastructure and sectoral measures. Public investment in hard and soft infrastructure is a precondition for private investment in agriculture, while constraints on financial market development can be a substantial obstacle. Over the long term, land productivity is weakened by underinvestment in land improvement as a result of low incomes and limited financial market development, leading to a progressive deterioration in land quality. Climate change is expected to exacerbate this process, resulting in a projected 18-per-cent reduction in cereal yields in low-income countries between 2000 and 2050. The resulting changes in total agricultural output in LDCs range from +5 per cent to -40 per cent, with much stronger effects in African than in Asian LDCs. This is likely to reduce labour productivity. Rural diversification is also a key driver and facilitator of productivity growth and upgrading in agriculture. Rising off-farm incomes provide additional financing for agricultural investment and technological upgrading and boost demand growth for agricultural produce; and the development of off-farm activities increases the supply of key inputs and services for agriculture. Improved vertical coordination is critical to achieving a timely flow of productivity-enhancing inputs to farmers and of quality agricultural raw materials to agro-industry.
9