Competitiveness increases productive growth – specifically in the agricultural market
Gopinath et al 2/7/18 (Munisamy; professor in the Department of Agricultural and Resource Economics and Director of the Applied Economics Graduate Program AND Terry Roe; professor emeritus at the Department of Applied Economics, University of Minnesota AND Matthew D. Shane; faculty of Social Science and Humanities at the University of Ontario Institute of Technology “Competitiveness of U.S. Food Processing: Benefits from Primary Agriculture” https://www-jstor-org.proxy.lib.umich.edu/stable/pdf/1243860.pdf?refreqid=excelsior%3A7212aa593d6aba5e8a8a99768b2836e7) JK
Thus, policies which tend to distort markets, for example, by raising the price of primary agricultural outputs, can adversely affect the competitiveness of the food processing sector. Policies and programs that tend to induce productivity growth, such as public agricultural R&D that lower production costs in either sector, can increase the competitiveness of both sectors de- pending upon the magnitude of the price and income elasticities of food demand. TFP gains in primary agriculture are the major source of growth in its GDP, and these gains are strongly associated with public investment in agricul- tural R&D and public infrastructure. These in- vestments, while maintaining the viability of the farm sector, contribute significantly to the competitiveness of the food processing sector, with ultimate gains to consumers in the form of lower real food prices. Other sectors of the economy receive indirect benefits from the sav- ings in food expenditures, which can be allo- cated to savings and purchases on nonfood goods and service.