Faculty Publications

Agricultural Productivity, The Real Effective Exchange Rate, And Structural Change: Some Evidence From Africa

Document Type

Article

Keywords

agriculture, real exchange rate depreciation, structural change

Journal/Book/Conference Title

Review of Development Economics

Volume

24

Issue

1

First Page

31

Last Page

44

Abstract

Agriculture is thought to play a number of roles in the early development process. All of these roles involve fostering non-agricultural development, in particular manufacturing. It is argued in this paper that agriculture plays a role that has hitherto been ignored. Specifically, if agricultural labor productivity increases faster than manufacturing labor productivity, the real effective exchange rate will depreciate. This depreciation of real effective exchange rate occurs because in very poor countries agriculture makes up the dominant share of both GDP and employment. The depreciation also makes it easier for a country to expand the production of tradables relative to nontradables, with manufacturing being the main tradable. This proposition, which as agricultural labor productivity increases relative to manufacturing labor productivity the real effective exchange rate depreciates, is tested using data drawn from 10 sub-Saharan African countries.

Original Publication Date

2-1-2020

DOI of published version

10.1111/rode.12640

Repository

UNI ScholarWorks, Rod Library, University of Northern Iowa

Language

en

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