CHAPTER FIVE: INSTITUTIONS AND RURAL URBAN RELATIONS

5.1 Introduction
• The term institutions can be defined as rules of a society or of organizations that
facilitate coordination among people.
• Is complex norms of behavior that serving collectively valued purposes in a society.
Relations that indicate some sort of institutions including:
• Government and non-government social
• Norms of behavior, rules and traditions
• One of the most important institutions is the government.
• legislative, executive, and judicial branches sets out formal rules and enforces them through
its various coercive systems.
• The formal rules together with informal rules created by the community and its
social organizations.
5.2 Institutions
• There is no single definition of institution.
• Two perspectives on institutions are:
1. The rule perspective: indicates that institutions are rules of a society or of
organizations that facilitate coordination among people
2. The behavior perspective: argues that institutions are complex norms of
behavior that persist upon time by serving collectively valued purposes in
a society.
• In the literature uses the terms institutions and organization
interchangeably.
• The formal and informal norms of behavior facilitates:
• exchange in factor and product markets in a stable human interaction
• creates conducive environment for the production of vital goods and
services.
• There is no disagreement on the issue of institutions as instruments of
development.
• The earlier emphasis that economic and technological factors are the causes
of underdevelopment was later shifted to emphasizing the quality of a
country's institutions.
• Unsuccessful or marginally effective development projects has shown that
long term non-viability in economic growth is attributable to institutional
and organizational failures.
• Nabli and Nugent indicated that economic development is defined as
economic growth accompanied by efficient institutional change.
• Olson (1996) explained that international differences in per capita
income between countries can be explained by differences in quality
of institutions and economic policies.
• Not by differences in their access to
• human capital,
• financial capital,
• land or natural resources.
• Cheema remarked that one of the factors that affect regional and
local development is institutional quality.
• the institutional machinery for regional development include two
components government and non-government.
• strong development organizations play a critical role by governing
human relations.
5.3 Government and economic development
• The term government refers to group of people and the whole set of
institutions in charge of running a country at any particular moment
of time.
• They are responsible for political decision making and for the
administration and enforcement of policy decisions.
• In the classical economic doctrine, state is considered as
counterproductive to the market system in resource allocation and
decision-making and preferred the invisible hands.
• But a growing literature in development economics criticizes the idea
of market failure meaning the adverse impact on society of imperfect
or non-working markets that aggravate socioeconomic problems.
• But from 1950’s, the State had a central role to play in accelerating
the pace of economic growth.
• by carrying out tasks that are unlikely or impossible if left for the
market.
• Imperfection of many markets, provided a well-known set of market
failures.
• So that state action was considered necessary to overcome.
• state interventions is critical assumption that governments act
benevolently to secure the public interest.
5.4 Rural-Urban relations
• Rural-urban linkages emanate from two spatial units, namely the
urban centers and the rural centers.
• This type of linkage has been described in different theories and
models of regional development.
• growth center strategy: derived from Perroux's growth pole theory
advocates an urban industrial expansion in few selected growth centers with
the hope of spread effects for modernizing the rural areas.
• But little consequence for the smaller centers and rural areas.
because of:
• the strong economic linkage of growth centers with external.
• overseas clients and suppliers.
• The rural service center strategy focuses on small rural centers for
own development and that of the hinterland.
• These centers are considered as engines of growth.
• (Hinderink and Titu, 1988).Their development as market and service
centers helps:
• increase the productive capacity of the rural producers
• promotes the commercialization and specialization of agriculture in the
framework of national economic growth.
• The relationship between - the center and the surrounding
countryside is considered as the root of the strategy to bring rural
and regional development.
• A more specific relationship which concerns the impact of these
centers on agricultural production includes:
1. The service centers that act as local markets or collection points for the
produce of local farms within the region;
2. The service centers that act as collection centers for exportable produce,
the beginning of a chain of movement from the farm to an overseas
consumer;
3. The service centers that provide specific agricultural inputs or services to
encourage the rural population to introduce technical change in production.
• (Funnel, 1976) Other relationship of the service center and the
hinterland involves social services:
• health, education,
• Extension and administration,
• legal and community services.
• The growth linkage literature asserts that a boom in food grain
production would stimulate growth in agriculture-related sectors
(trade, transport, services etc) and brings industrial expansion
(Dunham, 1991).
The linkages most frequently cited are:
• forward consumption linkage that result from the expenditure of farm
income on locally produced consumer goods and services.
• backward production linkages is manifested as agriculture that absorbs
inputs, example machinery and fertilizer produced by local industry
• forward production linkages refers to the local processing of agricultural
products.
• The various linkages described above have spatial and sectoral
dimensions.
• The spatial dimensions are manifested in terms of flows of goods,
people, capital, etc between rural and urban areas.
• Inter-sectoral relations refer to the different production and
consumption linkages pointed above.
• At global level, the liberalization of trade and production affects rural-
urban linkage.
• For instance, increased availability of imported manufactured and
processed goods affects consumption patterns in both rural and urban
settlements (Taco Li, 2003).
• At national level, macroeconomic policies linked to reform and
adjustment has implications for rural-urban linkage.
• For instance, decreasing subsidy in the farm sector will reduce farm
income.
• At local level:
• the nature of agricultural land,
• population density and distribution pattern,
• farming system (based on land tenure and access to natural resources),
• availability of roads and transport network
• are all significant factors shaping the patterns and nature of rural-urban
linkage.
5.4.1 Prerequisites of integrated urban-rural development

• In order to bring a balanced transformation of a nation, diverse

components of spatial and non-spatial elements need to be
coordinated and put in place.
• The following discusses these are important elements with their
implication for rural-urban linkage:
• Spatial integration
• Agricultural expansion
• Small town programs
• Physical infrastructure particularly transport and communication
• Rural industry and non-farm employment
• Favorable macroeconomic and sectoral policies