Are there dynamic productivity gains from agricultural trade?

What is it about?

Building on the growing literature demonstrating the presence of dynamic productivity gains from trade at the firm level in manufacturing in addition to the conventional static gains, this paper shows that freer trade in agricultural commodities (not including manufactured food products) is not poised to bring about such dynamic gains at the farm level due to the incapability of farm producers to determine their international competitiveness. We highlight that it is neither free trade nor greater competitive pressure on farm producers that would bring about productivity gains. It is shown that different investment strategies of the state or input supply corporations under the freer trade regime may be the source of potential productivity improvement from agricultural trade. In addition, when intra-industry prevails instead of inter-industry trade, there can be productivity gains at the aggregate industry level due to the transfer of resources from less efficient to more efficient farm producers within importing countries.

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