Sebastian Sardon (Northwestern University)

Sebastian Sardon
Northwestern University

Abstract

The agricultural sector features a large productivity gap between rich and developing countries, as well as substantial barriers inhibiting trade between them. In this paper, I assess whether removing such barriers can boost productivity in the developing world, and if so, through which channels. I study a 1997 USDA ban lift on avocado exports from the Mexican state of Michoacan to the U.S. Using a triple difference strategy and newly linked confidential census microdata (1970–2022), I find that the value of output per hectare increases by around 50% in treated areas suitable for avocado cultivation. Consistent with a model of agricultural production with heterogeneous farms, farms larger than 100 hectares roughly double their share of total land in treated areas. In the model, land consolidates because only large farms can afford the fixed costs of switching into avocados, which, unlike maize and other seasonal staples grown at baseline, require large amounts of water year-round. I use remote sensing to build a georeferenced dataset of irrigation investments and find a large investment response in suitable treated areas, on the order of 58% of Michoacan’s baseline agricultural GDP. Finally, I find that these gains only occur in treated areas where land markets are not too frictional. In areas dominated by collective land tenure (ejidos), trade’s effects on investment, consolidation, and productivity all fail to materialize.

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