Reap What You Sow: Agricultural Productivity, Structural Change and Urbanization

Danny McGowan () and Chrysovalantis Vasilakis
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Danny McGowan: University of Nottingham

No 2015019, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper explores the effects of agricultural productivity shocks on structural change. We exploit the invention of hybrid corn seed as an exogenous source of variation in US agricultural productivity. The technology significantly increased land productivity in counties suited to producing corn. Using a difference-in-difference estimation strategy we show that the treatment group experienced structural change as economic activity became more concentrated in agriculture. Owing to the factor bias of the technology, agricultural labor demand increased leading labor to reallocate from manufacturing to agriculture. We also find the rate of urbanization significantly decreases in treated counties, consistent with structural change causing a decrease in living standards. The findings support recent economic theory that argues factor-biased productivity shocks in agriculture can differentially affect structural change and economic development.

Keywords: agriculture; productivity; structural change; urbanization (search for similar items in EconPapers)
JEL-codes: D22 D24 L16 Q11 (search for similar items in EconPapers)
Pages: 46
Date: 2015-11-19
New Economics Papers: this item is included in nep-agr, nep-eff and nep-ino
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2015019

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