As Brazil grew richer in the 2000s, its agricultural workers left their farms in droves and headed to work in the rapidly growing industrial sector.
But what exactly was happening? Did new economic opportunities lure workers off farms or did changes in farming lead to industrialization?
In 2003, Brazil legalized the revolutionary Monsanto’s Roundup Ready soybean seed. The seed (called “Maradona soy” in South America after a famously agile soccer player) had been genetically engineered to be herbicide resistant.
In a pair of papers, [Jacopo Ponticelli, an associate professor of finance at Northwestern University] and coauthors trace how businesses across Brazil reaped the benefits of this revolutionary seed. In the first paper, the researchers find that the seed freed up farm laborers to find other jobs, allowing Brazil’s industrial sector to grow. In the second, the researchers find that the seed helped farmers put more money in the bank, which led to urban centers getting access to cheaper credit, allowing banks to finance more manufacturing and services firms.
Ponticelli says the research not only sheds new light on how economies develop, but also challenges the widespread belief that funneling resources into farming stifles growth and innovation.
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