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Our results suggest that expansion of manufacturing output, though associated with reduced agricultural output in the short‐run, is associated with agricultural expansion over the long‐run.
As for the first method, the estimation results of the widely-used inter-country aggregate agricultural production function show that a country with better governance can produce more agricultural outputs, given the same amounts of agricultural inputs, the same education level, and the same climate condition.
The results show that improving the agricultural efficiency improves the GDP, welfare, trade balance, output and competitiveness of agricultural exports.
Diversification of the country’s economy and a drastic reduction in external debt would boost agricultural productivity in the country.
Economies that experience growth in aggregate output could be the beneficiaries of good institutions or good fortune that also helps the agricultural sector.
I further show that the non-tradable sector expands significantly when agricultural output increases.
Careful examination of the hypothesized socio-economic factors (political instability and industrial output), natural factor (rainfall), and human factor (carbon emission) showed that only industrial output and rainfall matter for agricultural output in the country: both variables have positive impacts on agricultural output.