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Global Agricultural Value Chains and Structural Transformation

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  • Lim, Sunghun

Abstract

Can the modern-day developing economies leapfrog manufacturing sector to directly to service sector through the global agricultural production? Global value chains (GVCs) has changed the nature of production around the world. Especially, the rise of global value chains (GVCs) in agriculture has been a salient feature of the world economy over recent years. Despite their importance for the world economy, it is, however, unclear whether participation in GVCs leads the structural transformation ─ that is, the move from an economy primarily based on agriculture to an economy primarily based on manufacture, and then on service. In this paper, I investigate the impact of the participation of GVCs in the agricultural sector on structural transformation in countries by using cross-country panel data for 183 countries (including 48 African countries) from 1990 to 2013. By using country-fixed effects, I find that in response to greater agricultural value chains participation, manufacturing employment remains stable, but employment in the services sector increases. In other words, modern-day developing economies are leapfrogging manufacturing to directly develop their services sector through GVCs in agriculture. This result is strongly and significantly robust to various model specifications with year fixed effects, regional-specific fixed effects, and time monotonicity. Also, by using alternative measures of structural transformation such as GDP shares by sectors or female employment shares, the results are still strongly robust. I measure the extent of agricultural GVCs by adopting the recent method by Wang et al. (NBER, 2017) at the country level. I control for agricultural trade policies, domestic policy to agriculture as well as agricultural land areas, urban population growth, and demographic structure of countries. This is an important result by providing the original evidence that the agricultural GVCs participation has played a significant role in economic development in the world.

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  • Lim, Sunghun, 2019. "Global Agricultural Value Chains and Structural Transformation," Staff Papers 285103, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umaesp:285103
    DOI: 10.22004/ag.econ.285103
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    2. Marc F. Bellemare, 2022. "Agricultural value chains: towards a marriage of development economics and industrial organisation?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(2), pages 241-255, April.
    3. Ahn, Soojung & Steinbach, Sandro, 2022. "COVID-19 Trade Actions and Their Impact on the Agricultural and Food Sector," 2023 Allied Social Sciences Association (ASSA) Annual Meeting, January 6-8, 2023, New Orleans, Louisiana 316789, Agricultural and Applied Economics Association.
    4. Ahn, Soojung & Steinbach, Sandro, 2022. "COVID-19 Trade Actions and Their Impact on the Agricultural and Food Sector," 2022 Allied Social Sciences Association (ASSA) Annual Meeting (Virtual), January 7-9, 2022 316789, Agricultural and Applied Economics Association.
    5. Soojung Ahn & Sandro Steinbach, 2023. "The impact of COVID‐19 trade measures on agricultural and food trade," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 911-927, June.

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    More about this item

    Keywords

    International Development;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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