Bustos, PaulaGarber, GabrielPonticelli, Jacopo2024-05-062024-05-062020Bustos P, Garber G, Ponticelli J. Capital accumulation and structural transformation. Q J Econ. 2020;135(2):1037-94. DOI: 10.1093/qje/qjz0440033-5533http://hdl.handle.net/10230/60023Several scholars argue that high agricultural productivity can retard industrial development because it draws resources toward the comparative advantage sector, agriculture. However, agricultural productivity growth can increase savings and the supply of capital, generating an expansion of the capital-intensive sector, manufacturing. We highlight this mechanism in a simple model and test its predictions in the context of a large and exogenous increase in agricultural productivity due to the adoption of genetically engineered soy in Brazil. We find that agricultural productivity growth generated an increase in savings, but these were not reinvested locally. Instead, there were capital outflows from rural areas. Capital reallocated toward urban regions, where it was invested in the industrial and service sectors. The degree of financial integration affected the speed of structural transformation. Regions that were more financially integrated with soy-producing areas through bank branch networks experienced faster growth in nonagricultural lending. Within these regions, firms with preexisting relationships with banks receiving funds from the soy area experienced faster growth in borrowing and employment.application/pdfeng© The Author(s) 2020. Published by Oxford University Press on behalf of President and Fellows of Harvard College. This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited. For commercial re-use, please contact journals.permissions@oup.comAgricultura -- Aspectes econòmicsinfo:eu-repo/semantics/articlehttp://dx.doi.org/10.1093/qje/qjz044info:eu-repo/semantics/openAccess