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The Missing Food Problem

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Poor countries have low labour productivity in agriculture relative to other sectors, yet predominantly consume domestically produced food. The existing literature on cross-country agricultural and aggregate productivity differences abstracts from open economy considerations – leaving open the question of why poor countries import so little food. I propose an answer: high trade barriers and low relative input costs (wages) in developing-country agriculture. With a modified Eaton-Kortum trade model, I show these distortions reconcile the cross-country productivity data with observed trade flows. Through various counterfactual exercises, I find these distortions contribute to cross-country productivity differences and future work should ascertain their underlying causes.

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Paper provided by Wilfrid Laurier University, Department of Economics in its series Working Papers with number tt0060.

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Length: 37
Date of creation: 2012
Date of revision: 2012
Handle: RePEc:wlu:wpaper:tt0060
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