Abstract
This study estimates an aggregate agricultural industry dynamic structural gravity model with
capital accumulation to assess the relationship between capital accumulation and determinants of
total factor productivity (TFP) in agricultural trade flows. The Armington elasticity of substitution
is 1.47. Institutional variables government investment, business regulations, legal enforcement
of contracts, and communication technology are key drivers of global agricultural TFP. The
capital stock transition parameter is 34.6%. Counterfactual analyses show that increasing all
countries’ TFP and improving institutional quality in countries with low-quality institutions
generally raise exports, imports, output, capital stock, and welfare.
