Cal State Fullerton Assistant Professor of Economics Alberto Rivera-Padilla looks at agricultural productivity as a major factor in income differences between countries and the related impacts on the farming profession and interregional trade in his new study, “Crop Choice, Trade Costs, and Agricultural Productivity,” which has been accepted by the Journal of Development Economics.
What motivated you to pursue this study of agricultural productivity? What do you hope the impact of this study will be?
The main motivation of this research is understanding income differences across countries. A large amount of literature has shown that agricultural productivity is crucial to understanding such differences because poor countries have a large employment share in agriculture, and productivity is very low in that sector compared to rich countries. I hope that this study impacts the literature by pushing the discussion to farming decisions, especially crop choices, as a key component of agricultural productivity in poor countries. The study also has important policy implications. It shows that reducing interregional trade costs in developing countries could induce farmers to specialize in cash crops with higher returns.
You found that most farmers grow staple crops, despite the fact that labor productivity in cash crops is substantially higher. What are the consequences of this?
The main implication is that the puzzling relationship between relatively high employment and low agricultural productivity in developing countries is largely driven by the also puzzling allocation of resources to low-productivity staple crops. In the case of Mexico, most farmers grow maize or other grains even when many cash crops have a much higher productivity in terms of labor and land. The paper argues that a high share of farmers chooses to grow staple grains because farmers can survive by growing and consuming crops like maize, and high trade costs are a barrier to enter cash crop markets. Moreover, if we think about rural poverty, the results imply that incentivizing farmers to grow cash crops could raise incomes in those regions. Finally, these results are related to differences in farming mechanization across countries. For example, grain production in the United States is highly mechanized, while in developing countries like Mexico subsistence grain farming is mostly labor intensive. These facts suggest that there is a relationship between farming modernization, labor allocations across types of crops, and agricultural labor productivity.
What is the most interesting or notable thing you learned from this study?
That value added per worker can be substantially high for certain types of crops in developing countries. In particular, the evidence suggests that more Mexican farmers should be specializing in fruits (cash crops), but they are not doing it. Why? This is the main question that I got from working in this project. I learned that subsistence needs and interregional trade costs can provide a partial answer to that question, but there could be other complementary explanations.
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