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Fertilizing growth: Agricultural inputs and their effects in economic development

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  • McArthur, John W.
  • McCord, Gordon C.

Abstract

This paper estimates the role of agronomic inputs in cereal yield improvements and the consequences for countries' processes of structural change. The results suggest a clear role for fertilizer, modern seeds and water in boosting yields. We then test for respective empirical links between agricultural yields and economic growth, labor share in agriculture and non-agricultural value added per worker. The identification strategy includes a novel instrumental variable that exploits the unique economic geography of fertilizer production and transport costs to countries' agricultural heartlands. We estimate that a half ton increase in staple yields generates a 14 to 19 percent higher GDP per capita and a 4.6 to 5.6 percentage point lower labor share in agriculture five years later. The results suggest a strong role for agricultural productivity as a driver of structural change.

Suggested Citation

  • McArthur, John W. & McCord, Gordon C., 2017. "Fertilizing growth: Agricultural inputs and their effects in economic development," Journal of Development Economics, Elsevier, vol. 127(C), pages 133-152.
  • Handle: RePEc:eee:deveco:v:127:y:2017:i:c:p:133-152
    DOI: 10.1016/j.jdeveco.2017.02.007
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    1. Zewdie, Markose Chekol & Van Passel, Steven & Cools, Jan & Tenessa, Daregot Berihun & Ayele, Zemen Ayalew & Tsegaye, Enyew Adgo & Minale, Amare Sewnet & Nyssen, Jan, 2019. "Direct and indirect effect of irrigation water availability on crop revenue in northwest Ethiopia: A structural equation model," Agricultural Water Management, Elsevier, vol. 220(C), pages 27-35.
    2. Kubitza, Christoph & Dib, Jonida Bou & Kopp, Thomas & Krishna, Vijesh V. & Nuryartono, Nunung & Qaim, Matin & Romero, Miriam & Klasen, Stephan, 2019. "Labor savings in agriculture and inequality at different spatial scales: The expansion of oil palm in Indonesia," EFForTS Discussion Paper Series 26, University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)".
    3. Aminou Arouna & Jeffrey D. Michler & Jourdain C. Lokossou, 2019. "Contract Farming and Rural Transformation: Evidence from a Field Experiment in Benin," NBER Working Papers 25665, National Bureau of Economic Research, Inc.
    4. Kharas, Homi & McArthur, John W. & von Braun, Joachim, 2017. "An evidence-based approach to ending rural hunger," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 11, pages 1-12.
    5. Moon, Wanki, 2018. "The Lack of Dynamic Gains from Trade in Agriculture: Implications for Governing Agricultural Trade," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266613, Southern Agricultural Economics Association.
    6. Cobbing, Jude & Hiller, Bradley, 2019. "Waking a sleeping giant: Realizing the potential of groundwater in Sub-Saharan Africa," World Development, Elsevier, vol. 122(C), pages 597-613.
    7. Julius Krebs & Sonja Bach, 2018. "Permaculture—Scientific Evidence of Principles for the Agroecological Design of Farming Systems," Sustainability, MDPI, Open Access Journal, vol. 10(9), pages 1-24, September.
    8. Nicolas Berman & Mathieu Couttenier & Raphael Soubeyran, 2017. "Fertile Ground for Conflict," Working Papers 17-06, LAMETA, Universtiy of Montpellier.
    9. Michelson, Hope & Ellison, Brenna & Fairbairn, Anna & Maertens, Annemie & Manyong, Victor, 2018. "Misperceived Quality: Fertilizer in Tanzania," MPRA Paper 90798, University Library of Munich, Germany.
    10. Charles Peter Mgeni & Klaus Müller & Stefan Sieber, 2018. "Sunflower Value Chain Enhancements for the Rural Economy in Tanzania: A Village Computable General Equilibrium-CGE Approach," Sustainability, MDPI, Open Access Journal, vol. 11(1), pages 1-22, December.
    11. Charles Peter Mgeni & Klaus Müller & Stefan Sieber, 2019. "Reducing Edible Oil Import Dependency in Tanzania: A Computable General Equilibrium CGE Approach," Sustainability, MDPI, Open Access Journal, vol. 11(16), pages 1-17, August.

    More about this item

    Keywords

    Agriculture; Fertilizer; Structural change; Growth; Green revolution;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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