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Modernization of Agriculture and Long-Term Growth

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  • Yang, Dennis T.

    ()
    (University of Virginia)

  • Zhu, Xiaodong

    ()
    (University of Toronto)

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

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5239.

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Length: 44 pages
Date of creation: Oct 2010
Date of revision:
Publication status: published in: Journal of Monetary Economics, 2013, 60 (3), 367–382
Handle: RePEc:iza:izadps:dp5239

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Keywords: transition mechanisms; relative price; agricultural modernization; Industrial Revolution; long-term growth; structural transformation; England;

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Citations

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Cited by:
  1. Klaus Desmet & Stephen L. Parente, 2010. "The Evolution of Markets and the Revolution of Industry: a unified theory of growth," 2010 Meeting Papers 990, Society for Economic Dynamics.
  2. 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.
  3. Breinlich, Holger & Ottaviano, Gianmarco & Temple, Jonathan, 2013. "Regional Growth and Regional Decline," CEPR Discussion Papers 9568, C.E.P.R. Discussion Papers.
  4. Alex Trew, 2014. "Spatial Takeoff in the First Industrial Revolution," CDMA Working Paper Series 201401, Centre for Dynamic Macroeconomic Analysis, revised 01 Jan 2014.
  5. Diao, Xinshen & Hazell, Peter & Resnick, Danielle & Thurlow, James, 2006. "The role of agriculture in development: implications for Sub-Saharan Africa," DSGD discussion papers 29, International Food Policy Research Institute (IFPRI).
  6. 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.

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