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On the Mechanics of Trade-Induced Structural Transformation

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Author Info
Sylvain Dessy
Flaubert Mbiekop
Stéphane Pallage

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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.

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Paper provided by CIRPEE in its series Cahiers de recherche with number 0529.

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Date of creation: 2005
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Handle: RePEc:lvl:lacicr:0529

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Related research
Keywords: Trade openness; skill-supply; agricultural extension services; general equilibrium;

Find related papers by 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, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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References listed on IDEAS
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    Other versions:
  3. Eicher, Theo S., 1999. "Trade, development and converging growth rates: Dynamic gains from trade reconsidered," Journal of International Economics, Elsevier, vol. 48(1), pages 179-198, June. [Downloadable!] (restricted)
  4. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages F73-F96, 02. [Downloadable!] (restricted)
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    Other versions:
  7. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 199-230, 04. [Downloadable!] (restricted)
    Other versions:
  8. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March. [Downloadable!] (restricted)
    Other versions:
  9. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-78, December. [Downloadable!] (restricted)
  10. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December. [Downloadable!] (restricted)
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  11. Matsuyama, Kiminori, 1990. "Perfect Equilibria in a Trade Liberalization Game," American Economic Review, American Economic Association, vol. 80(3), pages 480-92, June. [Downloadable!] (restricted)
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  12. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(4), pages 533-54, December. [Downloadable!] (restricted)
  13. Cartiglia, Filippo, 1997. "Credit constraints and human capital accumulation in the open economy," Journal of International Economics, Elsevier, vol. 43(1-2), pages 221-236, August. [Downloadable!] (restricted)
  14. Owens, Trudy & Hoddinott, John & Kinsey, Bill, 2003. "The Impact of Agricultural Extension on Farm Production in Resettlement Areas of Zimbabwe," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 337-57, January.
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  15. Ranjan, Priya, 2001. "Dynamic evolution of income distribution and credit-constrained human capital investment in open economies," Journal of International Economics, Elsevier, vol. 55(2), pages 329-358, December. [Downloadable!] (restricted)
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