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Modernization of agriculture and long-term growth

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  • Yang, Dennis Tao
  • Zhu, Xiaodong

Abstract

This paper develops a two-sector model that illuminates the role played by agricultural modernization in the transition from stagnation to growth. When agriculture relies on traditional technology, industrial development reduces the relative price of industrial products, but has a limited effect on per capita income because most labor has to remain in farming. Growth is not sustainable until this relative price drops below a certain threshold, thus inducing farmers to adopt modern technology that employs industry-supplied inputs. Once agricultural modernization begins, per capita income emerges from stasis and accelerates toward modern growth. Our calibrated model is largely consistent with the set of historical data we have compiled on the English economy, accounting well for the growth experience of England encompassing the Industrial Revolution.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 60 (2013)
Issue (Month): 3 ()
Pages: 367-382

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Handle: RePEc:eee:moneco:v:60:y:2013:i:3:p:367-382

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Web page: http://www.elsevier.com/locate/inca/505566

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Cited by:
  1. Alex Trew, 2014. "Spatial Takeoff in the First Industrial Revolution," Discussion Paper Series, Department of Economics 201401, Department of Economics, University of St. Andrews, revised 01 Jan 2014.
  2. Klaus Desmet & Stephen L. Parente, 2009. "The Evolution of Markets and the Revolution of Industry: A Unified Theory of Growth," Development Working Papers 284, Centro Studi Luca d\'Agliano, University of Milano.
  3. Holger Breinlich & Gianmarco I. P. Ottaviano & Jonathan R. W. Temple, 2013. "Regional growth and regional decline," LSE Research Online Documents on Economics 51575, London School of Economics and Political Science, LSE Library.
  4. Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, vol. 104(C), pages 165-180.
  5. Diao, Xinshen & Hazell, P.B.R. & Resnick, Danielle & Thurlow, James, 2007. "The role of agriculture in development: Implications for Sub-Saharan Africa," Research reports 153, International Food Policy Research Institute (IFPRI).
  6. Desmet, Klaus & Parente, Stephen, 2009. "The Evolution of Markets and the Revolution of Industry: A Quantitative Model of England's Development, 1300-2000," CEPR Discussion Papers 7290, C.E.P.R. Discussion Papers.

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