The role of agricultural productivity in economic development is addressed in a two-sector model of endogenous growth in which (a) preferences are non-homothetic and the income elasticity of demand for the agricultural good is less than unitary, and (b) the engine of growth is learning-by-doing in the manufacturing sector. For the closed economy case, the model predicts a positive link between agricultural productivity and economic growth, while, for the small open economy case, it predicts a negative link. This suggests that the openness of an economy should be an important factor when planning development strategy and predicting growth performance.
ASJC Scopus subject areas
- Economics and Econometrics