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Prioritization of types of investments: Operational tools for MCC agricultural investments


This report answers the question:

“What guidelines can be used to identify the types of agricultural investments that have the highest economic return, where “agriculture” is broadly defined to include primary production, handling, storage, transportation, distribution, processing, and retailing?”

Using the literature and MCC’s ERR analyses, we explain how agricultural investments fit in a wider development context, identify information useful to MCC’s decision making that is not provided by the ERR analyses, and suggest IFPRI tools for exploratory and ex-ante evaluative analysis that MCC can use in their decision-making process.

We find that economic context matters (Section 2). Policy, other public investment, and the structure of the food system and wider economy can affect the impacts of MCC’s investments. Our tools aim to take these factors into account.

IFPRI tools for exploratory analysis (Sections 3.1–3.3) can answer questions such as: At a high level, what policy or economic factors might be constraining the agricultural sector? Given a certain amount of investment or multiple goals to be reached (e.g., spurring economic growth, reducing poverty, limiting greenhouse gas emissions), where and how are MCC’s funds best spent?

IFPRI tools for ex-ante evaluative analysis (Sections 3.1–3.3) can answer questions such as: Beyond ERR, what outcomes of interest to MCC are likely to be impacted? Accounting for economic feedback effects and policy factors, what will the impact of an investment be?

To develop tools (Section 3.4), IFPRI considers technical aspects that are important to robust, realistic, and accurate analysis, including assumptions specific to developing country economies, capture of second-order effects, changes over time, capture of multiple outcomes of interest, handling of risk and uncertainty, and discounting. Choices made on technical aspects reflect economic assumptions about realworld situations and often contain ethical implications, so they are not taken lightly.

To choose tools (Section 3.5), IFPRI describes the factors determining which tool has the best suitability for a particular investment question and describes feasibility challenges that might be faced for the most sophisticated tools. In the final section of the report (Sections 4), we illustrate applications of a couple of the IFPRI tools.

Photo credit: FAO


Laborde Debucquet, David; Parent, Marie; and Piñeiro, Valeria. 2021. Prioritization of types of investments: Operational tools for MCC agricultural investments. IFPRI – MCC Technical Paper Series: Prioritizing Agricultural Investments for Income, Poverty Reduction, and Nutrition 4. Washington, DC: International Food Policy Research Institute (IFPRI); and Millennium Challenge Corporation (MCC).
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