The role of agriculture in aggregate business cycles

Resumo

There are important differences in business cycle fluctuations across countries. We document that these differences are systematically related to the share of agriculture in the economy: Countries intensive in agriculture feature high fluctuations in aggregate GDP, low relative volatility of aggregate employment, and low correlation of aggregate GDP and employment. In addition, agriculture has certain distinctive features over the business cycle: Output and employment in agriculture are more volatile than and not positively correlated with output and employment in the rest of the economy and output and employment are less correlated in agriculture than in non-agriculture. We also document that business cycle properties across sectors are related to the share of agriculture in the economy. Because of these features, agriculture may play a role in accounting for aggregate business cycles across countries. We calibrate a two-sector indivisible-labor business cycle model with agriculture and nonagriculture and show that agriculture is important in accounting for aggregate business cycles across countries.