Functional Distribution, Land Ownership and Industrial Takeoff: The Role of Effective Demand
AbstractThis paper analyses how the distribution of land property rights affects industrial takeoff and aggregate income through the demand side. We study a stylized economy composed of two sectors, agriculture and manufacturing. The former produces a single subsistence good while the latter is constituted of a continuum of markets producing distinct commodities. Following Murphy et al.  we model industrialization as the introduction of an increasing returns technology in place of a constant returns one. However, we depart from their framework by assuming income to be distributed according to functional groups membership (landowners, capitalists, workers). We carry out an equilibrium analysis for different levels of land ownership concentration proving that, under the specified conditions, there is a non-monotonic relation between the distribution of land property rights and both industrialization and income. We clarify that non-monotonicity arises because of the way land ownership concentration affects the level and the distribution of profits among capitalists which, in turn, shape their demand. Our results suggest that i) both a too concentrated and a too diffused distribution of land property rights can be detrimental to industrialization, ii) land ownership affects the economic performance of an industrializing country by determining the demand of manufactures of both landowners and capitalists, iii) in terms of optimal land distribution there may be a tradeoff between income and industrialization.
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Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_051.
Length: 32 pages
Date of creation: Jun 2006
Date of revision:
Other versions of this item:
- Bilancini Ennio & D'Alessandro Simone, 2008. "Functional Distribution, Land Ownership and Industrial Takeoff: The Role of Effective Demand," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-36, August.
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
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