Three Essays on Agricultural Economics

Abstract

This dissertation focuses on two issues of concern in agricultural economics. First, I look at the effects of participating in global agricultural value chains (GVCs) on national economic aspects. The rise of global value chains, wherein the different stages of the production process are located across different countries, has changed the nature of agricultural production around the world. However, little is known about how global value chains change the national economies. In Chapter 1, I study how participating in agricultural global value chains affects structural transformation in modern economies. I develop a theoretical model to demonstrate how the exports of intermediate inputs for agricultural production changes the structure of the economy in the exporting country under an open economy scenario. I then empirically study the effect of agricultural global value chain participation on structural transformation by using multi-region input-output data for 183 countries for the period 1990-2013. Results indicate that as more participating in agricultural global value chains, countries transform their economies from the agriculture sector directly to the service sector, by leapfrogging the manufacturing sector⸺which runs counter to conventional structural transformation narratives. My finding thus shows that trade liberalization through agricultural global value chains helps modern agrarian economies foster structural transformation that has been considered as a primary driver of sustainable economic growth. In Chapter 2, I empirically study the employment responses to the agricultural GVC. By using panel data, I find evidence that agricultural GVC participation is negatively associated with employment growth at the country level. Further, by decomposing GVCs into upstream and downstream, I find upstream participation has a positive effect on employment growth while downstream participation has a negative effect on employment growth. The effects of agricultural GVCs on employment growth are more clear in developing countries than in rich countries. This paper contributes to the literature on GVCs and international trade by providing the first empirical evidence of how agricultural GVC participation affects employment at the country level. Also, the findings in this study indicate that the agricultural development policy by providing evidence that positioning in GVCs is more important than the volume of overall GVC participation in the agricultural sector in order to increase employment growth. The second issue I study in my dissertation is the effect of crop diversification on food security. Crop diversification plays as one of the primary strategies of risk management for the poor. It is, however, unclear whether diversifying crop choices improves food security. In Chapter 3, I look at whether crop diversification is associated with food security wherein farmers’ risk aversion operates on food security through crop diversification for a sample of 354 households in rural Ethiopia. Relying on a field experiment aimed at eliciting risk aversion, I find that crop diversification is significantly and positively associated with food security. Looking at the mechanism behind this finding, I find farmers’ risk aversion significantly and negatively operates on food security through crop diversification. Moreover, by Acharya et al.’s method (2016), I find crop diversification is the only mechanism wherein risk aversion is associated with food security. My finding provides the original evidence that diversifying crop choices can help rural households secure more food.