ISSN: 0041-3216 (Online), 0041-3216 (Print)
Volume 92 Number 4
De-agriculturalisation in an energy-intensive economy: Contemporary evidence from output and employment dynamics in a multi-sector model of Trinidad and Tobago. (313)
De-agriculturalisation refers to the underperformance of key macro-agricultural variables, especially output and employment levels. In the early years of the present century, production agriculture in Trinidad and Tobago experienced several episodes of annual slumps and employment in agriculture declined considerably. Such events occurred within a comparatively accelerated macroeconomic environment. In economic literature, the Dutch disease is a popularised cause of such de-agriculturalisation in an oil and gas exporting economy like Trinidad and Tobago. Essentially, the Dutch disease details the negative side effects a booming tradable resource sector can have on the more traditional industries of an economy. It also documents the potentially favourable effects such a boom can have on the non-tradable service sector. Using this theory as a point of departure, the central purpose of this paper was to empirically determine the impact of an energy production boom on the agricultural, manufacturing and service sectors. Furthermore, an auxiliary object of this paper was to establish the nature of the linkages between the various economic sectors in the macroeconomy of Trinidad and Tobago. The estimation procedure made use of a reduced-form vector autoregression containing seven quarterly macroeconomic variables, from 2000Q3 to 2013Q3. The VAR was used to generate generalised impulse response functions, forecast-error variance decompositions and Granger-causal connections. Subsequently, the results indicated that an energy boom was adverse for the agricultural sector, but stimulating to the service and manufacturing sectors. There were also strong associations noted between the various economic sectors, but these relationships exhibited harmful effects for agriculture.
Keywords: De-agriculturalisation; Dutch Disease; Energy Boom; Trinidad and Tobago; Reduced-form Vector Autoregression; Generalised Impulse Response Function; Forecast-Error Variance Decomposition; Granger-causality