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Increasing Returns in Industry and the Role of Agriculture in Growth


  • Canning, David J


Despite diminishing returns in agriculture, the production of food is not a binding constraint on growth in industrialized countries. A model is constructed in which growth is associated with a movement of labor out of agriculture and into industry, where increasing returns prevail. If the increasing returns are large enough, long-run growth can be sustained by the production of even cheaper farm machinery. However, there may be a take-off problem if the economy starts near subsistence; it may be impossible to feed workers who move into industry in the periods before their output leads to greate r food production. Copyright 1988 by Royal Economic Society.

Suggested Citation

  • Canning, David J, 1988. "Increasing Returns in Industry and the Role of Agriculture in Growth," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 463-476, September.
  • Handle: RePEc:oup:oxecpp:v:40:y:1988:i:3:p:463-76

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    References listed on IDEAS

    1. Nicholas Kaldor, 1975. "What is Wrong with Economic Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 89(3), pages 347-357.
    2. Kaldor, Nicholas [Lord], 1976. "Inflation and Recession in the World Economy," Economic Journal, Royal Economic Society, vol. 86(344), pages 703-714, December.
    3. Costabile, Lilia & Rowthorn, Bob, 1985. "Malthus's Theory of Wages and Growth," Economic Journal, Royal Economic Society, vol. 95(378), pages 418-437, June.
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    Cited by:

    1. Codrina Rada, 2007. "A growth model for a two-sector economy with endogenous productivity," Working Papers 44, United Nations, Department of Economics and Social Affairs.
    2. Mervyn A. King & Mark Robson, 1989. "Endogenous Growth and the role of History," NBER Working Papers 3151, National Bureau of Economic Research, Inc.
    3. Casillas, Gabriel & Mitchell, Paul D., 2003. "Rural Credit Rationing And National Development Banks In Developing Countries," 2003 Annual meeting, July 27-30, Montreal, Canada 22199, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. David Bloom & David Canning & Günther Fink & Jocelyn Finlay, 2009. "Fertility, female labor force participation, and the demographic dividend," Journal of Economic Growth, Springer, vol. 14(2), pages 79-101, June.
    5. William Darity & Lewis S. Davis, 2005. "Growth, trade and uneven development," Cambridge Journal of Economics, Oxford University Press, vol. 29(1), pages 141-170, January.
    6. Blunch, Niels-Hugo & Verner, Dorte, 1999. "Sector growth and the dual economy model - evidence from Cote d'Ivoire, Ghana, and Zimbabwe," Policy Research Working Paper Series 2175, The World Bank.

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