The Macroeconomics of Intensive Agriculture

Timo Boppart, Patrick Kiernan, Per Krusell and Hannes Malmberg

No 31101, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Developing countries employ a very large share of their workforce in agriculture, a sector in which their labor productivity is particularly low. We take a macroeconomic approach to analyze the role of agriculture in development. We construct a new database with systematic measures of inputs and outputs of agricultural production around the globe. The data exhibits strong neoclassical features: going from poor to rich countries, capital and intermediate input prices decline dramatically relative to labor prices; concurrently, capital and intermediate input use in agriculture increases by a factor of 300–800 relative to labor. Input intensification accounts for a bit less than two thirds of the agricultural labor productivity gap between the poorest and richest countries. Our observations are well explained by an aggregate agricultural production function with input substitutabilities significantly above unity. On the demand side, standard non-homothetic preferences accurately capture how the expenditure share of agricultural goods varies across the development spectrum. We incorporate our findings into a closed-economy general-equilibrium model with minimal distortions, showing that non-agricultural TFP differences play a much more important role than agricultural TFP differences in explaining income differences.

JEL-codes: E0 O0 O13 Q0 (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-agr and nep-mac
Note: EFG
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Working Paper: The Macroeconomics of Intensive Agriculture (2023)
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