The Revival of Agriculture and Inclusive Growth during the Commodity Boom in Latin America

Latin America has constituted a recent example of inclusive growth by reducing poverty and income inequality simultaneously during the latest commodity boom. Against the backdrop of non-inclusive and non-transformative nature of commodity booms, we ask whether growth of agriculture was able to speed up structural transformation, and, relatedly, if agricultural growth was inclusive. We examine 16 countries for the period 1994-2014 and find that the increase in agricultural productivity is associated with an increase in both non-agricultural employment during the boom. We also find that income per capita growth has been increasing also among the poor, even if the income elasticities are lower in rural than in urban areas. Focusing on the distribution of agricultural income in Brazil and Colombia between 2003 and 2013, we find that any improvement did go through income for the bottom and the intermediate deciles. Furthermore, formal employment was positively connected to the development of agricultural prices, income improvement of the bottom 40 per cent and the quality of manufacturing exports. In other words, the commodity boom, through agricultural growth, increased linkages across sectors. We conclude that the boom is associated with advances in structural change and moderate inclusive growth rather than mere redistribution.