Séminaire

The Macroeconomics of Intensive Agriculture

Timo Boppart (IIES Stockholm University)

19 novembre 2019, 14h00–15h30

Salle MS001

Macroeconomics Seminar

Résumé

The development process is characterized by drastic structural change away from agriculture. We construct a two-sector neoclassical general-equilibrium model aimed at evaluating the roots of this transformation. We collect data from a large cross-section of countries and use it to construct the key model counterparts. We estimate a gross production function for agriculture using input quantities and prices and use it to construct sector-specific TFPs. Here we find that the relative agricultural TFP is similar in poor compared to in rich countries. We base our estimate of the demand for agricultural vs. other goods on historical cross-household data from the U.S. Our model, which, given the TFP series, features no distortions, can account for around 2/3 of the overall structural transformation. In addition, it is successful in replicating the bulk of the movements in relative quantities and prices of inputs. Of the mechanisms present, the most powerful one is the non-homotheticity of preferences, causing a diminishing food demand at higher incomes, but we also find that the high capital-labor substitutability of agricultural production, leading to factor intensification, has an important role to play. We finally use our model for two experiments. First, we show that a rise in non-agricultural TFP would be far more potent than agricultural TFP at helping poor economies become rich. This result is contrary to a intuition based on Hulten’s theorem and is explained by important non-linear general-equilibrium effects. Second, we show that the general-equilibrium effects of land reductions (say, due to climate change) can be drastic in a closed economy.

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