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Agricultural Productivity and Industrial Growth. Evidence from Brazil

Author

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  • Jacopo Ponticelli

    (UPF)

  • Bruno Caprettini

    (Universitat Pompeu Fabra)

  • Paula Bustos

    (Universitat Pompeu Fabra)

Abstract

We study the effects of agricultural productivity on industrial development. Productivity growth in agriculture can speed up industrial growth through three channels. First it releases labor, a factor intensively used in manufacturing. Second, it generates income, increasing demand for manufacturing goods. Third, it might increase savings that are channeled to finance industrial projects. However, Matsuyama (1992) notes that some of the positive effects of agricultural productivity on industrialization occur only in closed economies, while in open economies a comparative advantage in agriculture can slow down industrial growth. We provide direct empirical evidence on the impact of a new agricultural technology on industrial growth by studying the effects of the widespread adoption of genetically modified soybean seeds on Brazilian manufacturing firms. To establish causality, we exploit exogenous differences in soil and weather characteristics across geographical areas leading to a differential impact of the new technology on yields.

Suggested Citation

  • Jacopo Ponticelli & Bruno Caprettini & Paula Bustos, 2012. "Agricultural Productivity and Industrial Growth. Evidence from Brazil," 2012 Meeting Papers 895, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:895
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    Cited by:

    1. Siying Hu & Shangkun Lu & Huiqiu Zhou, 2023. "Public Investment, Environmental Regulation, and the Sustainable Development of Agriculture in China Based on the Decomposition of Green Total Factor Productivity," Sustainability, MDPI, vol. 15(2), pages 1-21, January.

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