Nowadays everybody in Bolivia talks about revolution and the first thing that anyone can imagine, and has seen in the last days, is people fighting and killing each other. I do not want to talk about that kind of revolutions, instead I will talk about another revolution that Bolivia should achieve: A productive revolution in the agricultural sector.

A longstanding question in economics is why some countries are so much richer than others. GDP per capita in Asia grew during the last four decades at 5.2 percent, in the OECD at 3.3 percent and in Latin America at 1.2 percent. In fact the performance in Latin America has been very poor (see table).

Table 1: GDP per capita (US$ at international prices of 1996)

Source: Penn World Table 6.1.

Lucas (2000) (1) indicates that the main cause of this disparity is that today’s poor countries began the process of industrialization much later and also that this process has been slow. But, what is beneath industrialization? Beneath industrialization is a process of structural transformation in the agricultural sector.

Gollin, Parente and Rogerson (2002) (2) indicate that productivity growth in agriculture has two major effects on economic growth. First, since agriculture is the largest sector in most poor countries, increases in agricultural productivity have a big direct impact on aggregate output. Second, by stimulating the movement of resources into non-agriculture, productivity growth in agriculture can help to raise the average productivity of the economy.

Let’s take a look at the data. If Bolivia is far behind other Latin American countries, in terms of GDP per capita, the data should show that it is because Bolivia did not achieve a structural transformation in the agricultural sector that could allow the movement of labor into the non-agricultural sector.

Figure 1: Labor Share in Agriculture, selected Latin American Countries

It can be seen in the figure that in fact Bolivia has the largest labor share in agriculture. The decrease in the share suffered a change in slope in year 1965, but it changed again in 1971, returning to its slow rate of decrease. Notice the even the Agrarian Reform in 1952 did not represent a structural transformation in the agricultural sector, as most people think.

Other countries, in particular Chile and Argentina seem to have started their process of industrialization sooner in the past. This can be seen by the fact that their labor shares in agriculture are the smallest. Countries that have succeeded in increasing productivity in agriculture have experienced relatively sharp declines in agriculture’s share of GDP.  

That is the type of revolution that Bolivia needs. A revolution in terms of agricultural productivity that could allow withdrawing labor resources from agriculture and transfer them to manufacturing or other activities. Only when this is achieved, will Bolivia be able to start a process of industrialization. Moreover, now that prices of agricultural commodities are high, it is the opportunity to introduce technology into agriculture and transform our subsistence agriculture into a modern and efficient agriculture.

Did you think that a revolution without deaths could be possible? Yes, it is possible…an economic revolution. 
 

Related articles:

-  Bolivia back in the international headlines
 

(*) Researcher at the Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail: cmachicado@inesad.edu.bo .
(1) Gollin, Douglas, Stephen L. Parente and Richard Rogerson (2002), “Structural Transformation and Cross-Country Income Differences”, Williams College (mimeo).
(2) Lucas, Robert E. (2000), “Some Macroeconomics for the 21st Century,” Journal of Economic Perspectives, 14(1), pp. 159-168.

Ó Institute for Advanced Development Studies 2006. The opinions expressed in this newsletter are those of the author and do not necessarily coincide with those of the Institute.

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