Externalities in the Agricultural Export Sector and Economic Growth : A Developing Country Perspective

For years economists have ignored the diversity in agriculture and its potential to increase long run growth rates by enhancing a country's knowledge base. Nontraditional agriculture requires significant investments in infrastructure and knowledge: and therefore, has the potential to increase long run growth rates. Policy makers in developing countries have tended to enact macroeconomic policies designed to enhance the manufacturing sector at the expense of the agricultural sector. A theoretical model is developed to explain the dynamics between two nontraditional export sectors and the long run economic growth of the country. The model illustrates that growth in highly perishable agricultural exports, not domestic production of manufactured goods, can potentially lead to higher long run growth rates. The model is applied to the fruit and flower industries in Colombia to bring forth anexample of real world relevance