The purpose of this paper is to develop a simple model of an economy in which growth is driven by a combination of exogenous technical change in agriculture as well as by a rising world demand for labor-intensive manufactured exports. We explore the relative roles of agricultural innovation and rising export demand in a model with two traded industrial goods and a non-traded agricultural good, food. When the non-traded sector uses a specific factor, we show that technical change in agriculture may be the key to sustained factor accumulation in industry, in particular driving intersectoral labor migration. A key assumption is a less than unitary price elasticity of demand for food. Our results could form a crucial link in capturing the story of labor-abundant economies which experienced structural transformation and growth through labor-intensive manufactured exports, without prior technology breakthroughs in industry. They contribute to explaining the massive growth in factor accumulation which shows up in some growth accounting studies : they may also imply that some of the contribution of technical progress is mistakenly attributed solely to factor accumulation.
Structural change, agricultural productivity, labor migration, terms of trade
Green Revolutions and Miracle Economies: Agricultural Innovation, Trade and Growth. (2005). Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/863
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