Trade liberalisation, agricultural productivity and poverty in the Mediterranean region

A widely held view in the economic literature is that productivity growth is an important pathway through which trade liberalisation may alleviate poverty. This paper explores the link between trade openness, agricultural productivity growth and poverty reduction in a panel of Mediterranean countries. Technical efficiency scores and total factor productivity indexes are computed using the latent class stochastic frontier model to account for cross-country heterogeneity in farming production technologies. The relevance of agricultural productivity gains for poverty reduction is investigated through joint estimation of real per capita GDP growth and inequality changes in a dynamic panel setting. The findings illustrate the positive effects of openness on farming efficiency and productivity and give strong support to the view that agricultural productivity growth is a channel for poverty alleviation.