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This may be because of high transaction costs, for example due to poorly developed road systems, or market failures, such as the absence of functioning credit markets. The optimal policy solution would be to reduce transaction costs, via suitable investments and thereby correct market failures directly - in other words, treat the causes of a lack of competitiveness rather than the symptoms. However, such structural policies can take time to pay-off, so direct support for smallholder development (with an emphasis on input subsidies) has similarly been advanced as a practical alternative.

This number had increased to about 78 million in the year 2000. Six years later, in 2006, the estimated cumulative number of rural migrants was 132 million (OECD, 2009). In India, which has the largest rural population in the world (approximately 800 million), it is estimated that rural- to-urban migration accounts for about 30% of urbanisation (Mitra and Murayama, 2008). In Brazil, rapid migration from rural areas increased the share of the population in urban areas from 15% in 1940 to 56% in 1970, and to more than 80% in 2000 (Wagner and Ward, 1980; Brazilian Demographic Census 2000).

Most farm households have diversified their income sources, while some have become more specialised in higher-value agricultural products sold into more sophisticated marketing chains. The rural non-farm economy has grown to the point where it provides around half of all rural jobs. Successful industrialisation of the country has allowed direct and indirect net taxation of farming to be virtually eliminated. In the early 1960s more than 60% of the rural population lived in poverty. By the early 2000s that had been cut to only a little more than 10%.

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