Increasing Returns in Industry and the Role of Agriculture in Growth

David Canning

Oxford Economic Papers, 1988, vol. 40, issue 3, 463-76

Abstract: Despite diminishing returns in agriculture, the production of food is not a binding constraint on growth in industrialized countries. A model is constructed in which growth is associated with a movement of labor out of agriculture and into industry, where increasing returns prevail. If the increasing returns are large enough, long-run growth can be sustained by the production of even cheaper farm machinery. However, there may be a take-off problem if the economy starts near subsistence; it may be impossible to feed workers who move into industry in the periods before their output leads to greate r food production. Copyright 1988 by Royal Economic Society.

Date: 1988
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