Does agricultural growth have a causal effect on manufacturing growth?
AbstractThough 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 InfoPaper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 116003.
Date of creation: 02 Sep 2011
Date of revision:
Agricultural Growth; Manufacturing Growth; Instrumental variable.; Community/Rural/Urban Development; International Development; O14; O25; Q10;
Find related papers by JEL classification:
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- O25 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
- Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
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