UC San Diego
Fertilizing growth: Agricultural inputs and their effects in economic development.
- Author(s): McArthur, John W
- McCord, Gordon C
- et al.
Published Web Locationhttps://doi.org/10.1016/j.jdeveco.2017.02.007
This paper estimates the role of agronomic inputs in cereal yield improvements and the consequences for countries' processes of structural change. The results suggest a clear role for fertilizer, modern seeds and water in boosting yields. We then test for respective empirical links between agricultural yields and economic growth, labor share in agriculture and non-agricultural value added per worker. The identification strategy includes a novel instrumental variable that exploits the unique economic geography of fertilizer production and transport costs to countries' agricultural heartlands. We estimate that a half ton increase in staple yields generates a 14 to 19 percent higher GDP per capita and a 4.6 to 5.6 percentage point lower labor share in agriculture five years later. The results suggest a strong role for agricultural productivity as a driver of structural change.