The Missing Food Problem

Agriculture in poor countries has low productivity, high employment, and negligible trade flows relative to other sectors. These facts motivate a multi-sector, open-economy view of international productivity differences. With a quantitative multi-country model featuring nonhomothetic preferences, multiple interrelated sectors, distorted labor markets, and costly trade, I find: (1) trade amplifies the negative effect of labor market distortions; (2) trade costs -- large for poor countries, especially in agriculture -- significantly contribute to international productivity differences; and (3) explicitly modeling agriculture reveals additional channels through which poor countries may gain from trade.