NCPA - National Center for Policy Analysis

Agriculture and Development

August 13, 2002

A longstanding question in world politics is how to help the Third World develop. According to observers, growth in agricultural productivity is central to industrialization and development.

Industrialization is a key component of development. However, industrial development takes time to occur. A country that began to industrialize in 1950 won't achieve true industrial stability until roughly 100 years later. To reach economic stability, agricultural productivity is crucial.

Examining data for the period 1960 to 1990 for 62 countries defined as developing by the Food and Agriculture Organization (FAO) of the United Nations, researchers demonstrate the importance of agricultural productivity. The article finds that:

  • On average, the contribution of agricultural growth toward GDP growth is considerable -- 54 percent.
  • Increases in agricultural productivity allow for workers to move into other areas of the economy, where the output per worker is substantially higher.
  • For example, shifting a worker from agriculture to non-agriculture in 1960 would have tripled his output in Korea or Malaysia and would have increased it by a factor of 9 in Thailand.

Researchers found the sector shifts caused by increased agriculture productivity represents 29 percent of GDP growth. It also explains the poverty of many nations - low agricultural productivity.

This has clear implications for the Western world's agricultural policy, observers say. By subsidizing their already superior farming system, Western governments are preventing the Third World a chance to lift itself out of poverty.

Source: Douglas Gollin, Stephen Parente, and Richard Rogerson. "The Role of Agriculture in Development," American Economic Review. Volume 92, Number 2. May 2002.


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