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Reap What You Sow: Agricultural Productivity, Structural Change and Urbanization

Author

Listed:
  • Danny McGowan

    (University of Nottingham)

  • Chrysovalantis Vasilakis

    (Bangor University and IRES)

Abstract

This paper explores the effects of agricultural productivity shocks on structural change. We exploit the invention of hybrid corn seed as an exogenous source of variation in US agricultural productivity. The technology significantly increased land productivity in counties suited to producing corn. Using a difference-in-difference estimation strategy we show that the treatment group experienced structural change as economic activity became more concentrated in agriculture. Owing to the factor bias of the technology, agricultural labor demand increased leading labor to reallocate from manufacturing to agriculture. We also find the rate of urbanization significantly decreases in treated counties, consistent with structural change causing a decrease in living standards. The findings support recent economic theory that argues factor-biased productivity shocks in agriculture can differentially affect structural change and economic development.

Suggested Citation

  • Danny McGowan & Chrysovalantis Vasilakis, 2015. "Reap What You Sow: Agricultural Productivity, Structural Change and Urbanization," LIDAM Discussion Papers IRES 2015019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2015019
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    References listed on IDEAS

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    More about this item

    Keywords

    agriculture; productivity; structural change; urbanization;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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