World Food Policy Volume 2, Number 1, Spring 2015 | Page 20

World Food Policy - Volume 2, Number 1 - Spring 2015

Measuring the Size of the Renewable Resource Sector:
The Case of Chile
William FosterA and Alberto ValdésA

As a percentage of national gross domestic product (GDP), farming is typically
small in middle-income and wealthier countries. But national accounts include
only on-farm activities, giving both the public and policymakers an impression
that the food sector is a minor actor in the economy. Much of past development
literature, using household expenditures, considered that farming generated few
positive externalities, with few backward and forward linkages to other sectors,
inviting the conclusion that stimulating agriculture was a low priority to boost
economic development, especially in Latin America. Using national accounts,
this study employs a concept of an expanded value added to capture agricultures
intersectoral linkages, yielding a more useful measure of sector size. In the case
of Chile, the expanded primary sector’s contribution is approximately double
that of simple national accounts, with forward links far exceeding backward. A
more refined division of labor and economic specialization, perhaps enhanced
by trade openness, appears to explain in part agriculture’s declining share in
national GDP and the growth of sectoral linkages.
Keywords: agricultural value added, national accounts, backward and forward
linkages, Chile

Introduction

sector? Using the standardized format of
national accounts, the share of production
agriculture in the GDP or value added
(VA) is the most direct measure of the
sector’s size and its contribution to the
larger economy. The definition of what
is agriculture, however, has implications
for interpreting this measure. In national
accounts, agriculture is a primary
industry, where productive activities
take place on the farm, and the VA of
activities—however simple but beyond
the farm gate and which contribute to
the value of agricultural products and
employment—is attributed to other,
nonagricultural sectors.

O

ur perception of the economic
importance of the agriculture
and food system is dominated by
official statistics of the farm sector’s share
in gross domestic product (GDP). With
economic development, the apparent
size of primary agriculture decreases, not
only in relative terms but perhaps also
in absolute terms, often leading many to
lament that farming is in decline. But the
interpretation of this apparent pattern
requires thinking about the question,
What is the real size of the agricultural
A

Department of Agricultural Economics, Pontificia Universidad Católica de Chile

19