Factor-biased agricultural productivity improvement and industrialization: evidence from the Belt and Road Countries

PurposeThis study investigates the effects of factor-biased agricultural productivity improvement (API) on industrialization in the Belt and Road Countries (BRCs).Design/methodology/approachApplying panel econometric models to a dataset covering 60 BRCs from 2000 to 2021, we explore how the growth of the manufacturing sector can be explained by factor-biased API.FindingsWe find that (1) API significantly boosts manufacturing in the developed BRCs, but not in the developing ones; (2) The impact of labor-saving API is weaker than its land-saving counterpart in the BRCs; (3) Trade openness negatively affects the role of agriculture in the process of structural transformation, whereas the BRI does not share this moderating effect; (4) Labor-saving API facilitates labor outflows from the agricultural sector to the service sector more than it does to the manufacturing sector. This phenomenon is more evident in the developing BRCs, implying a premature deindustrialization process.Practical implicationsDeveloping BRCs should note the linkages between the agricultural and manufacturing sectors when reassessing their industrialization policies. In the BRI cooperation with China, policy-makers should bolster projects that can improve agricultural productivity without impeding resource outflows from the agricultural industry to the manufacturing industry.Originality/valueConstructing a new dataset covering the past 2 decades, this is the first study that empirically examines the effects of factor-biased API on the manufacturing sector development within a global context. It also sheds some light on the effect of the BRI on the role of agriculture in the industrialization process of the BRCs.