Do Developed Countries Agricultural Policies Slow The Economic Growth of Developing Countries? A Dynamic General Equilibrium Approach

While globalization has benefited many developing countries by allowing them to increase their trade share, those that are primary agricultural exporters have been partially constrained from participating due to the trade barriers and domestic support in a few of the major developed countries. Using an inter-temporal general equilibrium model we demonstrate that agricultural trade reform in developed countries benefits developing countries, even the net food importing countries. The increase in their agricultural exports due to reform in the developed countries allows developing countries to increase imports of investment goods, which in turn increases their learning of new skills and organizational methods. This process increases labor productivity and returns to capital and land. We find the dynamic gains from the reform of agricultural policies to far exceed the static gains, and, most countries are better off.