Does agricultural trade affect productivity? Evidence from Chilean farms

Abstract

This paper analyzes the relationship between trade and agricultural productivity in Chile, a middle-income country with a recent noticeable history of agricultural trade. This study uses an agricultural commodity trade exposure index in a cross-sectional analysis of more than 70,000 farms to study the relationship between the trade exposure of agricultural commodities and the yields reported by these farms in the 1997 Chilean agricultural census. In order to capture both import and export exposure we subdivide farms in two groups, according to the Chilean case: farms producing only importables such as grains (traditional crops), and farms producing both traditional crops and non-traditional agricultural commodities (products more related to export markets). We exclude from our analysis farms producing only non-traditional products because the census only reports yields for traditional crops. We employ a switching regression model to analyze the effects of trade exposure on traditional crop yields for both groups of farms. Results show that the trade exposure index is positively related to farm yields for both groups, but with a larger effect on farmers producing both traditional and non-traditional commodities. These results are important because they suggest that spillovers from both importables and exportables produce gains in the productivity of traditional crops.