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CID Faculty Working Paper No. 266
Ishac Diwan, Olivier Gaddah, Rosie Osire
It has long been known that countries only converge conditionally i.e. poor countries catch up with richer ones only if they adopt policies and institutions that are conducive to economic growth. Recently, Dani Rodrik (2011) has shown that manufacturing industries, unlike countries, converge unconditionally. We look at countries' performance in agriculture and find that agricultural productivity actually shows unconditional divergence (and like GDP, conditional converge). This means that agriculture very much behaves like a country and not like industry. We find however that many crops do converge unconditionally, like industry. The question we then ask is: how can we make particular sectors in agriculture more like an "industry" and less like a "country?" The paper argues that the solution lies in finding business models that provide capital and access to missing markets in an aggregated fashion, thus forming high-productivity islands of quality. We provide examples and a discussion of promising business models that do that.