Agricultural Productivity, Comparative Advantage and Economic Growth

27 Pages Posted: 28 Dec 2006 Last revised: 16 Jan 2015

See all articles by Kiminori Matsuyama

Kiminori Matsuyama

Northwestern University - Department of Economics

Date Written: January 1991

Abstract

The role of agricultural productivity in economic development is addressed in a two-sector model of endogenous growth in which a) preferences are non-homothetic and the income elasticity of demand for the agricultural good is less than unitary, and b) the engine of growth is learning-by-doing in the manufacturing sector. For the closed economy case, the model predicts a positive link between agricultural productivity and economic growth and thus provides a formalization of the conventional wisdom, which asserts that agricultural revolution is a precondition for industrial revolution. For the open economy case, however, the model predicts a negative link; that is, an economy with a relatively unproductive agricultural sector experiences faster and accelerating growth. The result suggests that the openness of an economy should be an important factor when planning development strategy and predicting growth performance.

Suggested Citation

Matsuyama, Kiminori, Agricultural Productivity, Comparative Advantage and Economic Growth (January 1991). NBER Working Paper No. w3606, Available at SSRN: https://ssrn.com/abstract=471551

Kiminori Matsuyama (Contact Author)

Northwestern University - Department of Economics ( email )

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