Import Growth and the Emergence of an Agricultural Productivity Gap∗
نویسندگان
چکیده
This paper examines the impact of manufacturing import growth on agricultural productivity for a small open economy using a 2× 2 sector endogenous growth model. We show that the increase of import variety share in manufacturing, when there is no trade induced labor reallocation, drives the emergence of a sectoral productivity growth gap: productivity growth in agriculture is lower than in manufacturing. This explains, from the viewpoint of international trade, the empirical evidence that crosscountry productivity differences in agriculture are larger than in non-agriculture. Our argument is that the recent growth of manufacturing trade in poor countries benefits its own industry but brings costs to agriculture in terms of variety expansion. An effective policy in terms of increasing agricultural productivity in poor countries should be able to alleviate the negative impact of import growth in manufacturing. Cross-country evidence supports our results.
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