We study how international trade affects structural change in an agricultural exporting country. For this purpose, we calibrate a three-sector growth model to quantify the role of international trade in explaining structural change patterns observed in Paraguay. This country experienced a significant rise in net agricultural exports as a percentage of aggregate output during the period 1962–2012. We find the following results. First, international trade is crucial to explain the sectoral composition of employment in this country. The model including trade explains 84.2% of observed changes in employment shares during this period, while the model without trade can only account for 35.6% of observed changes. Second, employment in agriculture remains large in order to satisfy foreign demand. Third, employment shifts directly from agriculture into services in the long run, bypassing manufacturing. These patterns can only be explained by the rise in net agricultural exports.

Labor productivity differences between developing and developed countries are much larger in agriculture than in non-agriculture. We show that crosscountry differences in agricultural composition explain a substantial part of labor productivity differences. To this end, we group agricultural products into two sectors that are differentiated only by capital intensity. As the economy develops and capital accumulates, the price of labor-intensive agricultural goods relative to capital-intensive agricultural goods increases. This price change drives a process of structural change that shifts land and farmers to the capital-intensive sector, increasing labor productivity in agriculture. We illustrate this mechanism using a multisector growth model that generates transitional dynamics consistent with patterns of structural change observed in Brazil and other developing countries, and with crosscountry differences in agricultural composition and labor productivity. Finally, we show that taxes and regulations that create a misallocation of inputs within agriculture also reduce the relative labor productivity.

Resumen El objetivo de este trabajo es cuantificar la relación negativa entre actividad económica y la contención de la COVID-19 mediante la implementación de intervenciones no farmacéuticas en Paraguay. Para esto, calibramos el modelo desarrollado por Eichenbaum, Rebelo y Trabandt con datos de Paraguay. Utilizamos el modelo para simular la trayectoria de la actividad económica, dados distintos escenarios de infección. Consideramos tres casos de estudio. En el primero, consideramos una flexibilización de las medidas de intervención no farmacéuticas aún vigentes. En el segundo, estudiamos el impacto económico de contener una aceleración de la infección. En el tercer caso, analizamos una reducción de la infección y su efecto en la economía. Mediante el estudio de estos casos obtenemos una aproximación del costo económico de contener la infección.

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