The role of productivity, transportation costs, and barriers to intersectoral mobility in structural transformation

Cem Karayalcin and Mihaela Pintea

Economic Modelling, 2022, vol. 108, issue C

Abstract: The process of economic development is characterized by substantial resource reallocations across sectors. In this paper, we construct a baseline multi-sector model with barriers to the movement of labor from low-productivity traditional agriculture to modern sectors. With such barriers in place, we show that improved productivity in modern sectors (including agriculture) or reduced transportation costs may lead to rising agricultural employment and, through terms of trade effects, may harm traditional farmers if this sector is larger than a critical level. This suggests that policy advice based on the earlier literature needs revision. Reducing mobility barriers (through reduced costs for skills acquisition and institutional changes) and improving the productivity of traditional farmers must precede policies designed to increase the productivity of modern sectors or reduce transportation costs.

Keywords: Economic development; Multi-sector models; Structural transformation; Subsistence agriculture; Terms of trade; Transportation costs (search for similar items in EconPapers)
JEL-codes: E23 O10 O4 Q10 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The Role of Productivity, Transportation Costs, and Barriers to Intersectoral Mobility in Structural Transformation (2015)
Working Paper: The Role of Productivity, Transportation Costs, and Barriers to Intersectoral Mobility in Structural Transformation (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:108:y:2022:i:c:s0264999322000050

DOI: 10.1016/j.econmod.2022.105759

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