Working Paper: CEPR ID: DP18325
Authors: Kym Anderson
Abstract: The agricultural sector’s share of GDP in growing economies typically declines but, for a century from the early 1850s, Australia’s did not. Drawing on recent structural transformation literature, this paper seeks explanations for this unusual phenomenon, which is all the more striking because agriculture’s share of employment continued to decline throughout and growth in manufacturing was being stimulated by tariff protection from imports. Several factors contributed, including a huge land frontier that took more than a century for settlers to explore, rapid declines in initially crippling domestic and ocean trade costs for farm products, the absence of a need to do any processing of the two main exports during that period (gold and wool), and innovations by farmers and via a strong public agricultural R&D system that contributed to farm labour productivity nearly doubling over those ten decades. The ban on iron ore exports from 1938 and low export prices for fuels, minerals and metals during the two world wars and in the intervening decades also contributed.
Keywords: Structural transformation; Agricultural development; Farm productivity growth; Trade costs; Mining booms; Manufacturing protection
JEL Codes: F13; F63; N47; O13; Q17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade costs (F19) | Agricultural competitiveness (Q11) |
| Public agricultural R&D investments (Q16) | Farm productivity (Q11) |
| Land frontier exploration (F55) | Stability of agriculture's share of GDP (Q11) |
| Reduction in trade costs (F12) | Stability of agriculture's share of GDP (Q11) |
| Lack of necessity for processing exports (F10) | Stability of agriculture's share of GDP (Q11) |
| Ban on iron ore exports (L72) | Preservation of agricultural GDP share (Q11) |
| Low export prices for fuels, minerals, and metals (L71) | Preservation of agricultural GDP share (Q11) |