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Structural transformation away from agriculture: What role for trade?

Author

Listed:
  • Kym Anderson
  • Sundar Ponnusamy

Abstract

An understanding of how and why economies structurally transform away from agriculture as they grow is crucial for developing sensible farm and food policies. Typically, analysts who study this and related structural change issues focus on sectoral shares of gross domestic product (GDP) and employment. This paper draws on trade theory to focus as well on exports. It also notes that the trade costs of some products are too high at early stages of development to make international trade profitable, so a nontradables sector is recognized. The general equilibrium model presented in the theory section provides hypotheses about structural change in differently endowed economies as they grow. Those hypotheses are tested econometrically with a new annual endowments dataset covering 1995 to 2018 for more than 130 countries, a period when trade restrictions were at their lowest for at least a century. The results are consistent with long run de-agriculturalization in terms of sectoral shares of GDP and employment in the course of national economic growth. But a decline in agriculture’s share of exports in every country is not inevitable. Moreover, policies can be designed to support growth-enhancing and welfare-improving structural transformation without harming agricultural exporters and distorting world trade in farm products.

Suggested Citation

  • Kym Anderson & Sundar Ponnusamy, 2022. "Structural transformation away from agriculture: What role for trade?," Departmental Working Papers 2022-04, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2022-04
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    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/acde_crawford_anu_edu_au/2022-02/adce_td_anderson_and_ponnusamy_2022_04.pdf
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    References listed on IDEAS

    as
    1. William A. Masters & Kym Anderson, 2009. "Distortions to Agricultural Incentives in Africa," World Bank Publications - Books, The World Bank Group, number 2607.
    2. Will J. Martin & Peter G. Warr, 1994. "Determinants of agriculture's relative decline: Thailand," Agricultural Economics, International Association of Agricultural Economists, vol. 11(2-3), pages 219-235, December.
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    5. Kym Anderson & Sundar Ponnusamy, 2019. "Structural Transformation to Manufacturing and Services: What Role for Trade?," Asian Development Review, MIT Press, vol. 36(2), pages 32-71, September.
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    9. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-999, October.
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    Cited by:

    1. Kym Anderson, 2023. "Agriculture's globalization: Endowments, technologies, tastes and policies," Journal of Economic Surveys, Wiley Blackwell, vol. 37(4), pages 1314-1352, September.
    2. Kym Anderson, 2022. "Agriculture in a more uncertain global trade environment," Agricultural Economics, International Association of Agricultural Economists, vol. 53(4), pages 563-579, July.
    3. Kym Anderson, 2022. "Structural transformation in growing open economies: Australia’s experience," Departmental Working Papers 2022-13, The Australian National University, Arndt-Corden Department of Economics.
    4. Anderson, Kym, 2022. "Trade-related food policies in a more volatile climate and trade environment," Food Policy, Elsevier, vol. 109(C).

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    More about this item

    Keywords

    patterns of structural change; de-agriculturalization; comparative advantage; farm productivity growth;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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