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Modernization of Agriculture and Long-Term Growth

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  • Dennis Tao Yang
  • Xiaodong Zhu

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 University of Toronto, Department of Economics in its series Working Papers with number tecipa-376.

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Length: 43 pages
Date of creation: 13 Oct 2009
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-376

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

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Cited by:
  1. Alex Trew, . "Spatial Takeoff in the First Industrial Revolution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
  2. Klaus Desmet & Stephen L. Parente, 2009. "The evolution of markets and the revolution of industry: A unified theory of growth," Working Papers, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales 2009-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  3. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, Elsevier, in: Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779 Elsevier.
  4. Diao, Xinshen & Hazell, Peter & Resnick, Danielle & Thurlow, James, 2006. "The role of agriculture in development: implications for Sub-Saharan Africa," DSGD discussion papers, International Food Policy Research Institute (IFPRI) 29, International Food Policy Research Institute (IFPRI).
  5. 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, C.E.P.R. Discussion Papers 7290, C.E.P.R. Discussion Papers.
  6. Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, Elsevier, vol. 104(C), pages 165-180.

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