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Explaining the Relative Decline of Agriculture: A Supply-Side Analysis for Indonesia

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  • Martin, Will
  • Warr, Peter G

Abstract

The relative decline of agriculture in growing economies is a central feature of economic development and a major influence on agricultural policies. The literature on the causes of this decline has focused on the relative price effects arising from demand factors, especially Engel's law, rather than on supply-side influences, such as changes in relative factor endowments and differential rates of technical change. This article develops a simple structural model of the transformation of the Indonesian economy, applying an error correction mechanism to capture the dynamics resulting from disequilibria and the costs of adjustment. The decline in agriculture's share of gross domestic product is found to be caused much less by the relative price effects typically emphasized in the literature than by capital accumulation and rapid technical change in agriculture. Copyright 1993 by Oxford University Press.

Suggested Citation

  • Martin, Will & Warr, Peter G, 1993. "Explaining the Relative Decline of Agriculture: A Supply-Side Analysis for Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 381-401, September.
  • Handle: RePEc:oup:wbecrv:v:7:y:1993:i:3:p:381-401
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    Cited by:

    1. Schiff, Maurice*Valdes, Alberto, 1998. "Agriculture and the macroeconomy," Policy Research Working Paper Series 1967, The World Bank.
    2. Watson, Alistair S., 1996. "Principles of Grain Marketing: Some Lessons from Australian Experience," Technical Reports 113821, Australian Centre for International Agricultural Research.
    3. Martin, Will, 2005. "Outgrowing resource dependence theory and some recent developments," Policy Research Working Paper Series 3482, The World Bank.
    4. Salomón Kalmanovitz & Enrique López, 2003. "Patrones de Desarrollo y Fuentes de Crecimiento de la Agricultura," BORRADORES DE ECONOMIA 003315, BANCO DE LA REPÚBLICA.
    5. Tey, (John) Yeong-Sheng, 2008. "The Relative Decline of Agriculture in China," MPRA Paper 15057, University Library of Munich, Germany.
    6. Ianchovichina, Elena & Darwin, Roy & Shoemaker, Robbin, 2001. "Resource use and technological progress in agriculture: a dynamic general equilibrium analysis," Ecological Economics, Elsevier, vol. 38(2), pages 275-291, August.
    7. Kym Anderson & Anna Strutt, 2014. "Emerging economies, productivity growth and trade with resource-rich economies by 2030," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(4), pages 590-606, October.
    8. Govindan, Kumaresan & Gopinath, Munisamy & Roe, Terry L., 1996. "Growth accounting, supply response and factor returns in general equilibrium: The case of Indonesia," Journal of Asian Economics, Elsevier, vol. 7(1), pages 77-95.
    9. repec:idb:idbbks:350 is not listed on IDEAS
    10. Fukase,Emiko & Martin,William J., 2017. "Economic growth, convergence, and world food demand and supply," Policy Research Working Paper Series 8257, The World Bank.
    11. Sun, Ling & Fulginiti, Lilyan E. & Peterson, E. Wesley F., 1999. "Technology, Factor Endowment, Prices And The Relative Decline Of Agriculture In Taiwan," 1999 Annual meeting, August 8-11, Nashville, TN 21700, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Kym Anderson & Will Martin & Dominique van der Mensbrugghe, 2006. "Distortions to World Trade: Impacts on Agricultural Markets and Farm Incomes," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(2), pages 168-194.
    13. Chad E. Hart & John C. Beghin, 2004. "Rethinking Agricultural Domestic Support under the World Trade Organization," Center for Agricultural and Rural Development (CARD) Publications 04-bp43, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    14. Aboagye, Anthony Q. & Gunjal, Kisan, 2000. "An analysis of short-run response of export and domestic agriculture in sub-Saharan Africa," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 23(1), June.
    15. Acevedo, Carlos & Barry, Deborah & Rosa, Herman, 1995. "El Salvador's agricultural sector: Macroeconomic policy, agrarian change and the environment," World Development, Elsevier, vol. 23(12), pages 2153-2172, December.
    16. Will Martin & Kym Anderson, 2006. "Agricultural Trade Reform and the Doha Development Agenda," World Bank Publications, The World Bank, number 6889.
    17. Saenz, Mariana, 2010. "Structural Change in the Colombian Coffee Sector: 1975-2007," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61462, Agricultural and Applied Economics Association.
    18. Aboagye, Anthony Q. & Gunjal, Kisan, 2000. "An analysis of short-run response of export and domestic agriculture in sub-Saharan Africa," Agricultural Economics, Blackwell, vol. 23(1), pages 41-53, June.
    19. Miria Pigato, 2009. "Strengthening China's and India's Trade and Investment Ties to the Middle East and North Africa," World Bank Publications, The World Bank, number 2626.
    20. Temple, Jonathan, 2001. "Growing into Trouble: Indonesia After 1966," CEPR Discussion Papers 2932, C.E.P.R. Discussion Papers.
    21. Hertel, Thomas W. & Bach, Christian F. & Dimaranan, Betina & Martin, Will, 1996. "Growth, globalization, and gains from the Uruguay Round," Policy Research Working Paper Series 1614, The World Bank.
    22. Roehlano M. Briones, 2009. "Agricultural Diversification and the Fruits and Vegetables Sub-Sector : Policy Issues and Development Constraints in the Philippines," Development Economics Working Papers 22951, East Asian Bureau of Economic Research.
    23. Mundlack, Yair & Larson, Donald F. & Butzer, Rita, 2002. "Determinants of agricultural growth in Indonesia, the Philippines, and Thailand," Policy Research Working Paper Series 2803, The World Bank.
    24. Daniel Lederman & William F. Maloney, 2007. "Natural Resources : Neither Curse nor Destiny," World Bank Publications, The World Bank, number 7183, September.
      • Anthony J. Venables & William Maloney & Ari Kokko & Claudio Bravo Ortega & Daniel Lederman & Roberto Rigobón & José De Gregorio & Jesse Czelusta & Shamila A. Jayasuriya & Magnus Blomström & L. Colin X, 2007. "Natural Resources: Neither Curse nor Destiny," IDB Publications (Books), Inter-American Development Bank, number 59538 edited by William Maloney & Daniel Lederman, February.
    25. Esposti, Roberto, 2014. "On why and how agriculture declines," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 73-88.

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