The Role of Productivity, Transportation Costs, and Barriers to Intersectoral Mobility in Structural Transformation

April 30, 2015

Preview Citation

Format: Chicago

Cem Karayalcin, and Mihaela Pintea. The Role of Productivity, Transportation Costs, and Barriers to Intersectoral Mobility in Structural Transformation, (USA: International Monetary Fund, 2015) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The process of economic development is characterized by substantial reallocations of resources across sectors. In this paper, we construct a multi-sector model in which there are barriers to the movement of labor from low-productivity traditional agriculture to modern sectors. With the barrier in place, we show that improvements in productivity in modern sectors (including agriculture) or reductions in transportation costs may lead to a rise in agricultural employment and through terms-oftrade effects may harm subsistence farmers if the traditional subsistence sector is larger than a critical level. This suggests that policy advice based on the earlier literature needs to be revised. Reducing barriers to mobility (through reductions in the cost of skill acquisition and institutional changes) and improving the productivity of subsistence farmers needs to precede policies designed to increase the productivity of modern sectors or decrease transportation costs.

Subject: Agricultural sector, Consumption, Economic sectors, Labor, Manufacturing, National accounts, Production, Productivity, Transportation

Keywords: Agricultural sector, Agriculture sector, Economic development, Excess demand, Improvement result, Manufacturing, Modern agriculture, Multi-sector models, Productivity, Productivity difference, Productivity improvement, Structural transformation, Sub-Saharan Africa, Subsistence agriculture, Subsistence farming, Terms of trade, Transportation, Transportation cost, Transportation costs, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/091
Stock No:

WPIEA2015091
ISBN:

9781484350058
ISSN:

1018-5941

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