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Industrial growth, rural income and the sustainability of agriculture in the duel economy

Charles Perrings

Book/Report, 30 pages

A steady decline in per-capita agriculture in the low-income countries of sub-Saharan Africa has prompted a reappraisal of the agricultural pricing policies associated with the dominant strategy of growth-through-industrialisation. This paper considers the implications of the strategy for the utilisation of agricultural resources, using a simple variant of the duel economy model. The model is characterised by a direct relation between industrial wages and average agricultural income, implying that intervention in agricultural prices which depresses average agricultural income raises industrial profits. The paper discusses the conditions in which price intervention will be associated with the overutilisation of agricultural resources. It is argued that the liberalisation of price policy, with respect to tradeable inputs and outputs with corresponding revision of price policy with respect to non-tradeables may have just this effect, and so may threaten the sustainability of agriculture.

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