Fertilizing Growth: Agricultural Inputs

This paper uses cross-country panel data to estimate the agronomic inputs that lead to 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. It then estimates empirical links in developing economies between increased agricultural yields and economic growth; in particular, the spillover e ect from yield growth to declines of labor share in agriculture and increases of non-agricultural value added per capita. The identi cation strategy for the e ect of fertilizer includes a novel instrumental variable that exploits variation in global fertilizer price, interacted with the inverse distance between each country's agriculturally-weighted centroid and the nearest nitrogen fertilizer production facility. A half ton increase in staple yields (equal to the within-country standard deviation) is found to generate a 13 to 20 percent higher GDP per capita, a 3.3 to 3.9 percentage point lower labor share in agriculture ve years later, and approximately 20 percent higher non-agricultural value added per worker a decade later. The results suggest a strong role for agricultural productivity as a driver of structural change.