How Does Agriculture Affect the Economy?

Agricultural economics is a field that examines the economic impact of agriculture on society. It looks at how farmers and agribusinesses make decisions and how these decisions affect the economy.

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In the United States, agriculture is a vital industry. The country is among the world’s top producers of corn, soybeans, wheat, beef, pork, and poultry. And while the U.S. only ranks 16th in the world in terms of farmland, it is the largest producer of agricultural products by value. Agricultural products accounted for $138 billion in exports in 2017 and supported more than 24 million jobs throughout the country.

The agriculture industry contributes to the economy in a number of ways. First, it provides food and other products for people to consume. Second, it creates jobs for people both on farms and in related industries. Finally, agriculture provides an important source of tax revenue for state and local governments.

Agriculture’s contribution to the economy can be seen in a number of different ways. One way is through its impact on GDP. GDP is the value of all final goods and services produced within a country during a given period of time (usually one year). Agriculture accounts for a small share of GDP—around 2 percent—but it is vitally important to the economy nonetheless.

In addition to its direct contribution to GDP, agriculture also supports other economic activity indirectly. For example, farm machinery and equipment must be manufactured, which creates jobs in the manufacturing sector. In addition, farmers purchase inputs from suppliers, such as seed and fertilizer, which boosts employment in those industries as well. These indirect effects are known as “multiplier effects” because they multiply the original impact of agriculture on the economy.

Agriculture also has an impact on other parts of the economy beyond its direct and indirect contributions to GDP. For instance, farmland serves as an important asset for banks and other financial institutions that use it as collateral for loans. In addition, agricultural commodities are often used as inputs into other industries; corn is used to produce ethanol fuel, for example, while soybeans are used to make biodiesel fuel

The role of agriculture in the economy

Agriculture is a vital sector of the economy, providing food, fiber, and other products for consumption and export. The sector also supports other industries, such as transportation and manufacturing, and provides jobs for millions of workers. In addition, agriculture contributes to the nation’s economic growth and development.

The contribution of agriculture to GDP

Agriculture plays a vital role in the economy, contributing to GDP, employment, and exports. In 2018, agriculture accounted for 2.4% of GDP in the United States. This sector employed 1.3% of the workforce and generated $137.7 billion in exports.

The agricultural sector has a significant impact on other sectors of the economy as well. For example, the food and beverage industry is the largest consumer of agricultural products, accounting for 31% of all demand in 2017. The manufacturing sector is also a major consumer of agricultural products, using them as inputs for a variety of products, including textiles, chemicals, and biofuels.

The contribution of agriculture to employment

Agriculture is an important sector of many economies, both developed and developing. In developed countries, agriculture accounts for a small share of employment but a large share of GDP. In contrast, in developing countries, agriculture often accounts for a large share of both employment and GDP.

The contribution of agriculture to GDP varies widely across countries. In 2013, agriculture accounted for 11 percent of GDP in the United States but only 2 percent in the United Kingdom. In low-income countries, agriculture’s share of GDP is often more than 30 percent. The contribution of agriculture to employment is even more skewed, with farming accounting for more than 60 percent of employment in some low-income countries but less than 2 percent in high-income countries.

The importance of the agricultural sector has declined over time in most developed countries. This is due to a number of factors, including mechanization (which reduces the need for labor) and productivity growth (which increases the amount of output that can be produced with a given amount of inputs). As a result, the share of the workforce employed in agriculture has declined steadily in most developed countries over the past century. In 1900, nearly 40 percent of workers in the United States were employed in agriculture; by 2000, that figure had fallen to less than 2 percent. A similar pattern has occurred in other developed countries.

The impact of agriculture on other sectors of the economy

Agriculture is a vital sector of the economy, providing food, fiber, and other resources. The sector also supports other industries, including transportation, manufacturing, and tourism. In this section, we’ll take a closer look at how agriculture impacts the economy.

The impact of agriculture on manufacturing

The impact of agriculture on manufacturing is often underestimated. It is usually thought of as a sector that is only important for primary industries such as food and drink, but the truth is that agriculture has a huge impact on the manufacturing sector.

In fact, agriculture is one of the most important industries for the economy as a whole. The sector provides employment for millions of people across the globe, and it contributes to the production of a wide range of manufactured goods.

Without agriculture, the manufacturing sector would simply not be able to function. Agriculture provides the raw materials that are used in many manufactured products, such as textiles, paper and plastics. The sector also plays a vital role in supplying food and drink to the population, which is essential for the health and wellbeing of citizens.

In addition, agriculture also has a direct impact on other manufacturing industries such as transportation and construction. For example, the transportation industry relies heavily on agricultural products such as corn and wheat to produce biofuels, which are used to power vehicles. Similarly, construction companies use agricultural products such as timber to build houses and other structures.

It is clear then that agriculture plays a vital role in supporting the manufacturing sector. Without agriculture, manufacturing would grind to a halt, and this would have a devastating effect on economies around the world.

The impact of agriculture on services

The agricultural sector has a significant impact on the economy, both in terms of its contribution to GDP and its employment. However, the sector’s importance goes beyond its direct contribution to the economy. The linkages between agriculture and other sectors mean that agriculture also indirectly contributes to economic growth and development.

One of the most important linkage effects is between agriculture and the services sector. The services sector includes a wide range of activities such as transport, communication, finance, trade, and tourism. These activities are all vital for the effective functioning of the agricultural sector. For example, transport and communication services are essential for getting agricultural products to market. Similarly, financial services are required for farmers to access credit and insurance. Trade is important for ensuring that farmers have access to inputs such as seed and fertilizer, as well as markets for their output. And tourism can provide an important source of income for rural communities that are involved in agriculture.

While the linkages between agriculture and services are important for economic growth, they also create some risks. For example, if there is a disruption to transport or communication services, it can have a major impact on agricultural production. Similarly, if there is a financial crisis, it can lead to problems for farmers in accessing credit and insurance. And if there is a downturn in the tourism sector, it can reduce demand for agricultural products


In conclusion, agriculture affects the economy in a number of ways. It provides employment opportunities, contributes to GDP, and supplies raw materials for industry. It also plays a role in international trade, and can be a significant source of government revenue. While the sector faces challenges, such as volatile markets and climate change, it remains an important part of the global economy.

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