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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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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-472.

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Length: Unknown pages
Date of creation: 18 Jan 2013
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Handle: RePEc:tor:tecipa:tecipa-472

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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. Breinlich, Holger & Ottaviano, Gianmarco & Temple, Jonathan, 2013. "Regional Growth and Regional Decline," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9568, C.E.P.R. Discussion Papers.
  2. 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.
  3. Klaus Desmet & Stephen Parente, 2012. "The evolution of markets and the revolution of industry: a unified theory of growth," Journal of Economic Growth, Springer, Springer, vol. 17(3), pages 205-234, September.
  4. Diao, Xinshen & Hazell, P.B.R. & Resnick, Danielle & Thurlow, James, 2007. "The role of agriculture in development: Implications for Sub-Saharan Africa," Research reports, International Food Policy Research Institute (IFPRI) 153, International Food Policy Research Institute (IFPRI).
  5. Alex Trew, 2014. "Spatial Takeoff in the First Industrial Revolution," CDMA Working Paper Series, Centre for Dynamic Macroeconomic Analysis 201401, Centre for Dynamic Macroeconomic Analysis, revised 01 Jan 2014.
  6. 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.

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