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Does agricultural growth have a causal effect on manufacturing growth?

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  • Shifa, Abdulaziz B.
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    Abstract

    Though the role of agricultural growth for manufacturing growth has been at the center of the discourse on economic development, empirically identifying the causal effect of agricultural growth on manufacturing growth has remained illusive for the correlation between the two doesn't necessarily imply causality. This paper attempts to overcome the identification problem. Since agriculture is heavily dependent on the weather, random weather variations are used as instruments to identify the causal impact of agricultural growth on manufacturing growth. Results show that agricultural growth has a significant positive impact on manufacturing growth. The impact is higher the higher is agriculture's share in the economy (as measured by GDP and employment share). For example, in an economy with 50% of agricultural GDP, a 1% increase in agricultural output increases manufacturing output by about 1%.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 116003.

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    Date of creation: 02 Sep 2011
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    Handle: RePEc:ags:eaae11:116003

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    Related research

    Keywords: Agricultural Growth; Manufacturing Growth; Instrumental variable.; Community/Rural/Urban Development; International Development; O14; O25; Q10;

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    1. Anderson, Kym & Martin, William J., 2007. "Distortions to Agricultural Incentives in Asia," Agricultural Distortions Working Paper 48557, World Bank.
    2. Ardeni, Pier Giorgio & Freebairn, John, 2002. "The macroeconomics of agriculture," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 28, pages 1455-1485 Elsevier.
    3. repec:fth:stanho:e-92-3 is not listed on IDEAS
    4. Majumdar, Sumon & Mani, Anandi & Mukand, Sharun W., 2004. "Politics, information and the urban bias," Journal of Development Economics, Elsevier, vol. 75(1), pages 137-165, October.
    5. Bruce L. Gardner, 2000. "Economic Growth and Low Incomes in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(5), pages 1059-1074.
    6. Richard Tiffin & Xavier Irz, 2006. "Is agriculture the engine of growth?," Agricultural Economics, International Association of Agricultural Economists, vol. 35(1), pages 79-89, 07.
    7. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper 48394, World Bank.
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