Structural transformation away from agriculture in growing open economies

Abstract

Understanding how and why economies structurally transform away from agriculture as they grow is crucial for developing sensible growth strategies and 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 article 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 transformation in differently endowed open economies as they grow. Those hypotheses are tested econometrically with a new annual endowments dataset covering 1995-2018 for more than 130 countries. The results are consistent with long run de-agriculturalization in the course of national economic growth in terms not only of sectoral shares of GDP and employment but also of exports. We find those shares are not significantly affected by either differences across countries in relative factor endowments or relative rates of sectoral assistance from government; but the agricultural GDP and employment shares are higher the higher is the share of agriculture in national exports.

Agriculture's globalization: Endowments, technologies, tastes and policies

“…Economic growth and associated structural transformations have been shown to be strongly associated with the long-run trends in policy interventions described above (Anderson & Hayami, 1986;Anderson & Ponnusamy 2022). Together these developments have been key drivers of changes in global farm trade patterns.…”

Why did agriculture's share of Australian gross domestic product not decline for a century?

“…This article is a revision of part of the 18th Corden Public Lecture, University of Melbourne, 13 October 2022. Thanks are due to three referees and to participants at the lecture for their helpful comments, to Ross Garnaut, Peter Lloyd and other co‐authors with whom some of the ideas herein were developed, and to Sundar Ponnusamy for compiling Figures S3 and S4 (drawing on Anderson & Ponnusamy, 2023). Open access publishing facilitated by The University of Adelaide, as part of the Wiley ‐ The University of Adelaide agreement via the Council of Australian University Librarians.…”

“…(drawing onAnderson & Ponnusamy, 2023). Open access publishing facilitated by The University of Adelaide, as part of the Wiley -The University of Adelaide agreement via the Council of Australian University Librarians.DATA AVA I L A BI L I T Y STAT E M E N TAll data are in the public domain as references in the text.ORC I DKym Anderson https://orcid.org/0000-0002-1472-3352R E F E R E NC E S…”

Repurposing agricultural support policies for shared prosperity in rural Fiji

“…As in all growing economies (Anderson & Ponnusamy, 2023), agricultureʼs relative importance in Fiji has been on a long-term downward trend. That decline is compared in Figure 1 with that of all upper-middle-income countries (UMICs) which, as a group, had the same average per capita income in 2004 as Fiji.…”