The Missing Food Problem: Trade, Agriculture, and International Productivity Differences

Abstract

Agriculture in poor countries has low productivity, high employment, and negligible trade flows relative to other sectors. These facts motivate a multisector, open-economy view of international productivity differences. With a quantitative multicountry model featuring nonhomothetic preferences, multiple interrelated sectors, distorted labor markets, and costly trade, I find: trade amplifies the negative effect of labor market distortions; trade costs-large for poor countries, especially in agriculture-significantly contribute to international productivity differences; and explicitly modeling agriculture reveals additional channels through which poor countries may gain from trade.

Publication
American Economic Journal: Macroeconomics
Date
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Trevor Tombe
Associate Professor of Economics