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The role of productivity, transportation costs, and barriers to intersectoral mobility in structural transformation

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  • Karayalcin, Cem
  • Pintea, Mihaela

Abstract

The process of economic development is characterized by substantial resource reallocations across sectors. In this paper, we construct a baseline multi-sector model with barriers to the movement of labor from low-productivity traditional agriculture to modern sectors. With such barriers in place, we show that improved productivity in modern sectors (including agriculture) or reduced transportation costs may lead to rising agricultural employment and, through terms of trade effects, may harm traditional farmers if this sector is larger than a critical level. This suggests that policy advice based on the earlier literature needs revision. Reducing mobility barriers (through reduced costs for skills acquisition and institutional changes) and improving the productivity of traditional farmers must precede policies designed to increase the productivity of modern sectors or reduce transportation costs.

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  • Karayalcin, Cem & Pintea, Mihaela, 2022. "The role of productivity, transportation costs, and barriers to intersectoral mobility in structural transformation," Economic Modelling, Elsevier, vol. 108(C).
    • Handle: RePEc:eee:ecmode:v:108:y:2022:i:c:s0264999322000050
    DOI: 10.1016/j.econmod.2022.105759
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    Cited by:

    1. Yu Chen & Wenhui Zhang & Yilian Liu & Weisong Li & Chengwu Liu & Shengfu Yang, 2023. "Spatial Pattern of Large-Scale Agricultural Land and Spatial Heterogeneity of Influencing Factors in the Mountainous Areas of Western China—Wuling Mountains as an Example," Land, MDPI, vol. 12(11), pages 1-26, November.
    2. Han Zhang & Dongli Wu, 2022. "The Impact of Transport Infrastructure on Rural Industrial Integration: Spatial Spillover Effects and Spatio-Temporal Heterogeneity," Land, MDPI, vol. 11(7), pages 1-18, July.

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    More about this item

    Keywords

    Economic development; Multi-sector models; Structural transformation; Subsistence agriculture; Terms of trade; Transportation costs;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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