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On the Mechanics of Trade-Induced Structural Transformation

Author

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  • Sylvain Dessy
  • Flaubert Mbiekop
  • Stéphane Pallage

Abstract

Gains from trade come from a certain degree of specialisation among trade partners. Specialisation in the case of an agriculture-based developing country might be feared to imply a higher reliance than ever on low skill laobur. Trade might thus be seen as a step away from the much awaited structural transformation of the economy, which can only come with increases in agricultural productivity. In this paper, we suggest that it needs not be the case. We show that trade openness can in fact trigger the structural transformation of such an agrarian society. It can induce a higher reliance on human capital accumulation an produce the necessary productivity gains for an economy to pick up. Our dynamic general equilibrium model provides a clear illustration of the mechanics behind such structural transformation.

Suggested Citation

  • Sylvain Dessy & Flaubert Mbiekop & Stéphane Pallage, 2005. "On the Mechanics of Trade-Induced Structural Transformation," Cahiers de recherche 0529, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0529
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    3. Teignier, Marc, 2018. "The role of trade in structural transformation," Journal of Development Economics, Elsevier, vol. 130(C), pages 45-65.

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    More about this item

    Keywords

    Trade openness; skill-supply; agricultural extension services; general equilibrium;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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