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Global Agricultural Value Chains and Structural Transformation

In: Risks in Agricultural Supply Chains

Author

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  • Sunghun Lim
Abstract
Can modern-day developing economies transform their economies by participating in global value chains (GVCs)? The rise of global value chains (GVCs) has changed the nature of production around the world over recent years. Conventionally, companies used to produce goods primarily in one country. That has all changed. Modern-day, a single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the final product. Although the transition out-of-agriculture is an important aspect of economic development in developing countries, it is unclear whether participation in global value chains (GVCs) fosters a structural transformation ─ the process whereby economic activity is reallocated from agriculture to manufacturing, and then from manufacturing to the services sector. In this paper, I investigate the effect of the participation in agricultural GVCs on the structural transformation. Using multi-region input-output data to measure GVC participation and crosscountry data for 183 countries for the period 1990-2013. I find that in response to greater agri-food global value-chain participation, modern-day agrarian economies are leapfrogging manufacturing to directly develop their services sector, which runs counter to conventional structural transformation narratives. This result is strongly robust to (i) various alternative specifications (i.e., regional-year fixed effects, a linear time trend, country-specific time trends, regional-specific time trends, all along with country fixed effects and country-specific year fixed effects), (ii) an alternative measure of structural transformation (GDP and employment shares), and (iii) an alternative measure of GVCs. By slicing the data, I also find that the move of structural transformation is statistically unclear in low-income countries. This is important for agri-food industrial, trade, and development policy by providing original evidence that believing in
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Suggested Citation

  • Sunghun Lim, 2021. "Global Agricultural Value Chains and Structural Transformation," NBER Chapters, in: Risks in Agricultural Supply Chains, pages 29-57, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14616
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    1. Ahn, Soojung & Steinbach, Sandro, 2022. "COVID-19 Trade Actions and Their Impact on the Agricultural and Food Sector," 2022 Allied Social Sciences Association (ASSA) Annual Meeting (Virtual), January 7-9, 2022 316789, Agricultural and Applied Economics Association.
    2. Soojung Ahn & Sandro Steinbach, 2023. "The impact of COVID‐19 trade measures on agricultural and food trade," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 911-927, June.
    3. Bangkit A. Wiryawan & Christian Otchia, 2022. "The legacy of the reformasi: the role of local government spending on industrial development in a decentralized Indonesia," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-19, December.
    4. Bellemare, Marc F., 2022. "Agricultural value chains: towards a marriage of development economics and industrial organisation?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(02), January.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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