Docstoc

Agricultural Productivity and Economic Growth

Document Sample
Agricultural Productivity and Economic Growth Powered By Docstoc
					Agricultural Productivity and
     Economic Growth:
    Empirical Analysis on the
    Contemporary Developing
           Countries
                  Motivation
• Significant number of the contemporary
  Developing Countries have reasonably large
  agriculture sector
• Though there is a general consensus on the fact
  that value creation in agriculture is relatively less
  than in other sectors it is still debatable what
  type of role agriculture can play in the overall
  evolution of economic growth of such
  economies
• Settling such a debate will have serious Policy
  Implication for such countries
              Existing Literatures
• Some take improvement in agricultural productivity as a necessary
   step toward a sustainable economic growth: R.Nurkse (1953) and
   that of W.W. Rostow (1960)
  - Most today’s developed economies
• Some other argue otherwise by mentioning the fact that even among
   the present day developed economies those that had emphasized
   on agriculture lagged behind those others : Mokyr(1976), Field
   (1978) and Wright (1979)
   - Belgium and the Netherlands
   - New England and the South
• Still some others say it depends, and this position can be taken as
   an attempt to reconcile the above two positions:K.Matsuyama(1996)
   - All developed economies and adds Emerging Economies
Theoretical Explanation of the third
             Position
• Matsuyama argues that IEDAg<1 while IEDMg>1
• Ag Pr Increases Income, but it depends on the nature of
  the economy where/how this additional income is spent
  - If we assume that the economy is closed, it is inevitable
  that there will be not only an increase in income but also
  surplus of labor; and hence Industrialization
  - If we assume an open economy, an increase in income
  could normally be spent on manufacturing products from
  the rest of the world, and there may not be much surplus
  labor since demand for agricultural products is not
  limited domestically; and hence countries could stay long
  without structural transformation
• The traditional view assumes basically a closed
  economy
 Some Descriptive Discussions:
Some closed economies with improvement
                in AgP

                                                                China
       In constant 2000 US




                             2000
                                                                                                   Real GDP per
                             1500                                                                  capita
                $




                             1000
                              500
                                0                                                                  Average
                                    1981
                                           1984
                                                  1987
                                                         1990
                                                                1993
                                                                       1996
                                                                              1999
                                                                                     2002
                                                                                            2005
                                                                                                   Productivity of
                                                                                                   Labour in
                                                            Years                                  Agriculture
In constant 2000 US
                                                     India
                                                                              Real GDP per
                      800
                                                                              capita
                      600
                      400
         $




                      200
                        0                                                     Average
                            1981
                                   1985
                                          1989
                                                  1993
                                                         1997
                                                                2001
                                                                       2005
                                                                              Agricultural
                                                                              Productivity of
                                                 Year                         Labour in
                                                                              Agriculture
                             Indonesia
In constant 2000 US



                      1000
                       800               Real GDP per
                       600               capita
         $




                       400
                       200
                         0               Average
                                         Productivity of
                         81
                         86

                         91
                         96
                         01
                                         Labour in
                      19
                      19

                      19
                      19
                      20


                             Years       Agriculture
                                             Bangladesh
In constant 2000 US




                      500                                                     Real GDP per
                      400
                                                                              capita
                      300
         $




                      200
                      100
                        0                                                     Average
                                                                              Productivity of
                            1981

                                   1985
                                          1989

                                                  1993
                                                         1997

                                                                2001
                                                                       2005
                                                                              Labour in
                                                 Years                        Agriculture
Some open economies with some
     improvement in AgP
                                      Belarus
    In constant 2000




                       4000
                       3000
          US $




                       2000                     Real GDP per Capita
                       1000
                          0                     Average Productivity of
                                                Labour in Agriculture
                           90
                           92
                           94
                           96
                           98
                           00
                           02
                           04
                        19
                        19
                        19
                        19
                        19
                        20
                        20
                        20
                              Years
In constant 2000 US           Guyana

                      4000
                                       Real GDP per
                      3000             capita
                      2000
         $




                      1000
                         0             Average
                                       Productivity of
                         81
                         86

                         91
                         96
                         01            Labour in
                      19
                      19

                      19
                      19
                      20

                             Years     Agriculture
                                                          Tajikistan
In constant 2000 US $

                        600
                        500                                                     Real GDP per
                        400                                                     capita
                        300
                        200
                        100                                                     Average
                          0                                                     Productivity of
                                                                                Labour in
                              1992
                                     1994
                                            1996
                                                   1998
                                                           2000
                                                                  2002
                                                                         2004
                                                                                Agriculture
                                                   Years
Some open economies with no
     improvement AgP
                                                Estonia
   In constant 2000 US $


                           7000
                           6000
                           5000                            Real GDP per
                           4000                            capita
                           3000
                           2000
                           1000                            Average
                              0                            Productivity of
                                                           Labour in
                             92

                                   95

                                         98

                                               01

                                                      04   Agriculture
                            19

                                  19

                                        19

                                              20

                                                     20

                                             Years
                                                 Lesotho
In constant 2000 US

                      600
                                                                              Real GDP per
                      400                                                     capita
         $




                      200
                       0                                                      Avergage
                            1981
                                   1985
                                          1989
                                                  1993
                                                         1997
                                                                2001
                                                                       2005
                                                                              Productivity of
                                                                              Labour in
                                                 Year                         Agriculture
Some open economies with
   improvement in AgP
   In constant 2000 US $                           Malaysia

                           6000
                           5000
                                                                   Real GDP per
                           4000                                    capita
                           3000
                           2000
                           1000                                    Average
                              0                                    Productivity of
                                                                   Labour in
                             81
                                   85
                                        89
                                             93
                                                   97
                                                         01
                                                              05   Agriculture
                           19
                                  19
                                       19
                                            19
                                                  19
                                                       20
                                                            20

                                                 Years
                             Mauritius
In constant 2000 US

                      6000
                                         Real GDP per
                      4000               capita
         $




                      2000
                        0                Average
                                         Productivity of
                         81
                         86
                         91
                         96
                         01              Labour in
                      19
                      19
                      19
                      19
                      20

                             Years       Agriculture
             Regression Analysis
• Model Specification:
-MRW’s (1992) version of the Solow ( i.e. exogenous) growth model as
    a starting point: y=F(L,K)
-the model is augmented by G, which is a variable introduced to take
    into account the role of agricultural productivity in growth
-In order to take into account the impact of openness of an economy on
    the relationship between per capita income and agricultural
    productivity, a dummy variable, D, that interacts with agricultural
    productivity is introduced
- In the case of panel data regression, the paper tries to control the
    effect of country specific time-invariant (or slow moving) variables
                Data and Sample
• World Bank (WDI, 2008)
• It basically cover the period b/n 1981 and 2005
• those economies which had reasonably large relative size of
  agriculture sector in the early 1980’s are considered( i.e. mostly
  more than 20 % of GDP)
• In order to see clearly the impact of openness of the economies, of
  the identified countries only those which are considered to be highly
  closed and highly open economies are picked
  - here openness is measured as (M+X)/GDP
• Finally, depending on the availability of data 46 developing countries
  are included
• The data set includes real per capita income (2000 US $), real
  average agricultural productivity (2000 US $), growth in working age
  population, real gross capital formation as a percentage of GDP,
  real value of exports and imports as percentage of GDP
• For the panel regression each five year is considered as one period
                     Conclusion
• Matsuyama’s prediction is only partially consistent with
   the evidences from the contemporary developing
   countries
• openness of economies negatively affects the gains in
   the economic growth from improvement in the
   agricultural productivity, however, this effect is not strong
   enough to cause
  -either a long-run negative relationship between
   economic growth and agricultural productivity in the
   contemporary developing countries
  - or to bring large differences in the gains from
   agricultural productivity between the open and closed
   economies

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:3
posted:6/15/2012
language:
pages:18