Description:

Speakers: Sebastian Sardon and Christopher Sims

Title: Trade, Land Consolidation, and Agricultural Productivity 

Abstract: The agricultural sector features a large productivity gap between rich and developing countries, as well as substantial trade barriers inhibiting South-North flows in agricultural goods. This project tests whether removing such barriers can boost agricultural productivity in the developing world, in particular by reallocating land towards more productive farmers. We address this question by studying Mexico, where a ban on exporting avocados to the US was lifted in 1997. Following the ban lift, we find large increases in crop yields in treated areas that are highly suitable for avocado cultivation. Event study estimates suggest effects as large as $800 USD per hectare in treated villages (over 60% of the country’s mean output per hectare). We use newly linked confidential census data to show that export opportunities trigger land consolidation in treated areas, consistent with trade theory (e.g., Melitz, 2003). In such areas, more productive farms grow faster than unproductive ones, whereas farm growth is essentially independent of productivity elsewhere. Yield growth and land consolidation seem concentrated in places where communal land holdings are low, suggesting that gains from trade are only realized where land markets are not too frictional.