Market Institutions: Enhancing the Value of Urban-Rural Links

Abstract

Emerging local and global patterns, including urbanization, agro-industrialization and the rise of supermarkets, and trade liberalization, require synergies rather than divisions between rural and urban areas if farmers in poor countries are to benefit. For instance, better ruralurban linkages can ensure an adequate food supply for the city at affordable prices, and rural areas can serve as outlets for goods produced in urban areas. In the absence of strong rural-urban linkages, urban areas might face food shortages and rural areas might be left out of globalization, both as consumers and producers. To generate benefits, policymakers must strengthen the links between rural and urban markets. But market reforms such as trade liberalization and decentralization may not by themselves be sufficient to reduce the costs of exchange and induce rural-urban interactions. In many countries, poor infrastructure and institutional barriers also increase costs, stifling market exchange between rural and urban producers and sellers.