Structural Transformation of the Agricultural Sector In Low- and Middle-Income Economies

Abstract

Movement of labor from agriculture to nonagriculture and the associated increase in farm size through structural transformation are at the core of economic development. We conduct a comprehensive review of the literature exploring the causes and consequences of the transformation. We discuss ( a) the size and determinants for the persisting wage gap between agriculture and nonagriculture, ( b) policy-induced barriers to structural changes, ( c) the role of trade costs and technical change in shaping the nature of structural transformation and comparative advantage of regions, and ( d) how the overall development of an economy affects the relationship between farm size and farm productivity and hence changes competitiveness of different scales of farms. We also identify questions for policy and research and the ways in which new sources and interoperability of data can help answer these questions. Expected final online publication date for the Annual Review of Resource Economics, Volume 14 is October 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

Balancing the trade-offs between land productivity, labor productivity and labor intensity

“…Earning gaps have been largely attributed to imperfections in land and factors markets that impede the inter-sectoral reallocation of labor (Gollin 2021 ; Deininger et al. 2022 ). Consequently, policies have sought to address factor market imperfections, so that labor could freely move to regulate inter-sectoral labor misallocation and reduce general levels of poverty.…”

Linking Entrepreneurship to Productivity: Using a Composite Indicator for Farm-Level Innovation in UK Agriculture with Secondary Data

“…Business planning/benchmarking [31,[36][37][38] Knowledge acquisition use of information sources [16,27,29,39,40] Use of business management advice [31,41,42] Machinery sharing [43][44][45][46] Setting goals/targets for business [47,48] Use of integrated pest management (IPM) [20,49] Risk management [41,[50][51][52] Monitoring and evaluation [27,30,40,53] Record keeping [40,48,53] Training for IT skills [16,36] Investment in training programmes (non-IT) [14,25,28,[54][55][56] Changes to standard operating procedures [15,47,56,57] New technology innovations [58][59][60][61] From the perspective of drawbacks, perhaps the most restrictive barrier to a holistic analysis of the rol...…”

“…Various studies have identified, at the farm-business level, a number of drivers of productivity change, for example: structural change (e.g., increasing scale) [15], access to education and information [16], cooperation between farmers and with upstream and downstream actors [17], access to new/improved resources [15], climate change [16,18], and technological diffusion and innovation [16,19], among others. While there are a number of these drivers of productivity change, and the importance of these can vary from farm to farm [20], the Organisation for Economic Co-operation and Development (OECD) concludes that the most important driver of productivity improvement is innovation [21].…”

Why did agriculture's share of Australian gross domestic product not decline for a century?

“…Development economists began tracing that pattern of structural transformation many decades ago (Chenery, 1960; Clark, 1940; Fisher, 1939; Kuznets, 1957). They note also that agriculture's employment share typically exceeds its GDP share (Deininger et al., 2022; Timmer, 2009). By contrast, the GDP shares of both manufacturing and mining typically exceed their employment shares.…”