Description:

Speaker: Sebastian Sardon

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. We assess whether removing such barriers can boost productivity in the developing world, and if so through which channels. Guided by a model of agricultural production with heterogeneous farms, we study a 1997 USDA ban lift on avocado exports from Mexico to the US. Using a triple-difference strategy and newly linked confidential census microdata (1991–2022), we find that output per hectare increases by more than 30% in treated areas suitable for avocado cultivation. Consistent with the model, the share of land operated by private farms over 100 hectares roughly doubles in such places. In our framework, this process of land consolidation occurs because large farms are the only ones who can incur the fixed costs required to participate in export markets. One such cost is irrigation infrastructure, essential for avocado cultivation, which must be privately financed in the study area. In ongoing work, we use remote sensing to build a georeferenced dataset of irrigation investment. Preliminary results indicate that investment is concentrated in areas experiencing both productivity growth and land consolidation. Finally, we find that these gains only occur in localities where land markets are not too frictional. In treated areas dominated by collective land tenure, productivity growth, reallocation, and investment all fail to materialize.