Agricultural Productivity and Economic Development: Evidence from Brazil

This project attempts to study the effects of the adoption of new agricultural technologies on economic development in Brazil.

Development literature documents that the growth path of most advanced economies is accompanied by a process of structural transformation. As economies develop, the share of agriculture in employment falls and workers migrate to cities to find employment in the industrial and service sectors. Productivity growth in agriculture may speed up industrial growth in several ways, by releasing labour for the industrial sector amongst other reasons. However, several scholars have noted that the positive effects of agricultural productivity on industrialization occur only in closed economies, while in open economies a comparative advantage in agriculture can slow down industrial growth. There is scarce direct empirical evidence testing the mechanisms proposed by these models. This project attempts to study the effects of the adoption of new agricultural technologies on economic development in Brazil.

To achieve the above, the researchers will first analyse the effects of the adoption of genetically engineered soybean seeds. This new technology requires less labour per unit of land to yield the same output and can be characterized as land-biased technical change. In addition, they will study the effects of the adoption of second-harvest maize. This type of maize grows two crops a year, effectively doubling the land portion. Thus, it can be characterized as a labour-biased technical change. The simultaneous expansion of these two crops permits to assess the effect of agricultural productivity on structural transformation in open economies.

Brazil’s recent experience is particularly relevant for countries in Sub-Saharan Africa. Brazil has also successfully increased its agricultural output partly due to the adoption of genetically modified crops, which have not yet been adopted in most of Sub-Saharan Africa due to concerns regarding their impact on the environment and health. There is potential for agricultural technology transfer to significant areas of Sub-Saharan Africa that share similar geological and climatic conditions.