Seeds of Growth? Agricultural Productivity and the Transitional Dynamics of the Ramsey Model

Posted: 29 Feb 2008

See all articles by Xavier Irz

Xavier Irz

Food Standards Agency, Economics Branch/ARD

Terry L. Roe

University of Minnesota - College of Agricultural, Food and Environmental Sciences - Department of Applied Economics

Date Written: June 2005

Abstract

A two-sector Ramsey-type model of growth is developed to investigate the relationship between agricultural productivity and economy-wide growth. The framework takes into account the peculiarities of agriculture both in production (reliance on a fixed natural resource base) and in consumption (life-sustaining role and low income elasticity of food demand). The transitional dynamics of the model establish that when preferences respect Engel`s law, the level and growth rate of agricultural productivity influence the speed of capital accumulation. A calibration exercise shows that a small difference in agricultural productivity has drastic implications for the rate and pattern of growth of the economy. Hence, low agricultural productivity can form a bottleneck limiting growth, because high food prices result in a low saving rate.

Keywords: O11, O41

Suggested Citation

Irz, Xavier and Roe, Terry L., Seeds of Growth? Agricultural Productivity and the Transitional Dynamics of the Ramsey Model (June 2005). European Review of Agricultural Economics, Vol. 32, Issue 2, pp. 143-165, 2005, Available at SSRN: https://ssrn.com/abstract=914788

Xavier Irz (Contact Author)

Food Standards Agency, Economics Branch/ARD ( email )

Aviation House, 125 Kingsway
London, WC2B 6NH
United Kingdom

Terry L. Roe

University of Minnesota - College of Agricultural, Food and Environmental Sciences - Department of Applied Economics ( email )

1994 Buford Avenue
St. Paul, MN 55108
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
461
PlumX Metrics