On the Mechanics of Trade-Induced Structural Transformation

Sylvain Dessy (), Flaubert Mbiekop and Stephane Pallage

Cahiers de recherche from CIRPEE

Abstract: Gains from trade come from a certain degree of specialisation among trade partners. Specialisation in the case of an agriculture-based developing country might be feared to imply a higher reliance than ever on low skill laobur. Trade might thus be seen as a step away from the much awaited structural transformation of the economy, which can only come with increases in agricultural productivity. In this paper, we suggest that it needs not be the case. We show that trade openness can in fact trigger the structural transformation of such an agrarian society. It can induce a higher reliance on human capital accumulation an produce the necessary productivity gains for an economy to pick up. Our dynamic general equilibrium model provides a clear illustration of the mechanics behind such structural transformation.

Keywords: Trade openness; skill-supply; agricultural extension services; general equilibrium (search for similar items in EconPapers)
JEL-codes: F16 J21 J22 O11 O24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: Written 2005
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