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American Economic Association

Agriculture and Structural Transformation in Developing Countries: A Survey of Research


Author(s): Bruce F. Johnston
Source: Journal of Economic Literature, Vol. 8, No. 2 (Jun., 1970), pp. 369-404
Published by: American Economic Association
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Agricultureand Structural
Transformationin Developing
Countries:A Surveyof Research
By BRUCE F. JOHNSTON
Food ResearchInstitute,
StanfordUniversity

Thisessay,whichhas had a verylonggestation period,stemsfroman


invitationby the International
Committee forSocial SciencesDocu-
mentation fortheauthorto preparea book-length surveyof research
and bibliographyrelatingtoagriculture's
rolein economicdevelopment
as oneofa seriesofsurveysbeinginitiatedbytheCommittee. It proved
to be impossibleto carrythatoriginalprojectto completion,butI am
deeplyindebtedto theCommittee and itsSecretary General,Professor
JeanMeyriat, forhavingencouragedme to undertake a reviewofthe
literature
on thisdiffusebut important subject.The authoris also in-
debtedtotheCommittee forthegrantoffundsthatsupported thework
ofSorenNielsenas a researchassistant and to Dr. Nielsen,nowofthe
EconomicsDepartment at SimonFraserUniversity, forhisskillfutl
as-
sistancein preparingsummaries of manyofthecontributions thatare
reviewed.

THis REvIEwof the literature relatingto elaboratemore sophisticated models are


agriculture'srole in economicdevelop- noted.Finally,attention is givenin Section
mentdeals witha subjectthatis vast and IV to a numberof contributions thatare
not clearlydefined. -The emphasisis on pertinent between
to the interrelationships
contributions by agricultural and general agriculture and industry in the courseof
economists thatappearto makesignificant development. In additionto T. W. Schultz's
contributions to an understanding of the industrial-impact hypothesisand Paul Bair-
distinctivefeaturesofthemodernization of och'sverydifferent analysisof agriculture-
agriculture,a processviewedas partofthe industry interactions,the generalproblem
overalltransformation of a traditional
econ- ofmaximizing thepositive,growth-promot-
omy. inginteractions betweenagriculturalandin-
a
After shortsummary in
in SectionI ofthe dustrialexpansionis examined thelight
empirical evidenceon theseculardeclineof of HarryJohnson's theoryof development
agriculture'sshare in GNP and in labor as a generalized processof capitalaccumu-
force,SectionII is devotedto an examina- lation.
tion of varioustheoretical explanationsof
theprocessofstructural transformation and I. The SecularDecline of the Agricultural
some relatedpolicyissues.In SectionIII SectorintheCourseofDevelopment
thecriticism by V. W. Ruttanand othersof One ofthemostfirmly established empir-
dual economyand growthstagemodelsis ical generalizations in economics relatesto
summarizedand a few of the efforts to theseculardeclineoftheagricultural popu-
369
370 Journalof Economic Literature

lation and labor force and agriculture's the Union of South Africa,the M sector
share in GNP in the course of economicde- rose throughout,and the trends in the S
velopment.This phenomenon,firststressed sectorwere mixed. The differencebetween
by A. G. B. Fisher [30, 1939], is a major Australia and Japan in the initial level of
theme of Colin Clark's highly influential agriculture'sshare in nationalproductis an
Conditions ofEconomicProgress[21,1957], extremeexample of an importantcontrast
firstpublished in 1940. Further empirical in the conditions prevailing in the early
evidence based on long-termchanges in phase of modem economicgrowthin Euro-
the U.S.A., Sweden, and the U.K. is offered pean-settledcountriesand to a lesser extent
in a 1952 monograph by Ojala [101.]; in European countries,as comparedto late
Latil's 1956 volume [69.] focuses on long- developing countriessuch as Japan. Thus,
termchanges in France, but also examines agriculture'sshare in gross domesticprod-
the changes in the sectoral distributionof uct in Australia was only 22 percent in
populationand incomein the U.S. and U.K. 1861/65 and (in current prices) rose
Kuznets' 1957 monograph[66.]-"Quanti- slightlyto 23 percent as an average for
tative Aspects of the Economic Growthof 1934/35-1938/39. In contrast,agriculture
Nations, II. IndustrialDistributionof Na- accounted for 63 percent of net domestic
tional Product and Labor Force"-provides product in Japan in 1878-82 but its share
a thoroughexaminationof the changingin- had declined to 26 percentby 1923-27 [68,
dustrial structureof labor force and na- Kuznets,1966,p. 91].
tional product associated with economic The internationaldifferences in industrial
growth. Based on both cross-sectionand distributionof the labor force were very
time series data, his analysis examines similarto the differences in the distribution
changes in the sectoral distributionof na- of nationalproduct.The evidence available
tional productand labor force and also in- fromlong-termseries shows the expected
tersectoral differences in product per decline in the shareof the labor forcein the
worker. The internationalcomparisonsin A sector and a quite consistentrise in the
tlhe1957 monographand his 1966book [68.] share of labor in the S sector. The rise in
are based on a groupingof countriesinto the labor forceshare of the M sector,how-
seven classes according to per capita in- ever, is not nearlyas consistentas thissec-
come and deal with changes in threemajor tor's rising share in national product. The
industrialsectors: marked differencebetween the initial con-
Sector A-agriculture,fisheries,and for- ditions in European and European-settled
estry; countriesand in late-developingcountries
Sector M-manufacturing,mining, and (as representedby Japan) is also evidentin
construction; the data on labor force distribution.As
SectorS-all serviceindustries. early as 1890, agriculturerepresentedonly
On the basis of his internationalcompari- 26 percentof Australia'slabor force,where-
sons Kuznets finds a negative correlation as in Japan its share was approximately
betweenincomelevel and the A sector,pos- 85 percentin 1872 and was (still) 52 per-
itive correlationbetween income level and centin 1925-in spite of the rapid industrial
the M sector,while services did not vary expansionthathad takenplace [68, Kuznets,
systematically with per capita income. His 1966,p. 107].
analysisof long-termtrendsled to markedly This analysis of intersectoraldifferences
similarresults.In all 15 countriesforwhich in productper workeris based on a ratioof
time serieswere available, the A sectorde- the percent of the national product in a
clined throughout.In all but Australiaand given sector divided by the percentof the
A Surveyof Research
Johnston: 371
workersin that sector.On the basis of his GNP. The cross-sectionanalysis yields the
cross-section analysis, Kuznets finds that result that the "growthelasticity"for pri-
the relative product per worker in the A mary industry(agricultureand mining) is
sectorin the low-income countriesis partic- .494 and the growthelasticityfor agricul-
ularly low. Thus the contrast between the ture alone is .474. The growthelasticities
developed and underdevelopedcountries in for all other industrial sectors are much
productper workerin agriculture must be higher: 1.362 for industry,1.288 for trans-
even greater than in total product per port and communications,and 1,066 for
worker.As a tentativeexplanation, Kuznets other services.' The general pattern of
pointsout that the negative correlationbe- growthis reflectedin a rise in the share of
tween the percentageshare of the A sector industrialoutputfrom17 per cent at a per
in the labor force and its relative level of capita incomelevel of $100 to 38 percentat
productper workersuggeststhat countries a level of $1,000; manufacturing alone rises
with lower product per capita and larger from12 percentto 33 percentoverthe same
shares of theirlabor force in the A sector income range, and income from primary
may have an oversupplyof labor relativeto productiondeclines from45 to 15 percent
capital, hence a lower product per worker of the total.
in the A sector than in the countrywide A recent paper by Chenery and Lance
product. The analysis of long-termtrends Taylor [19, 1968] extends the analysis in
indicates that productper workerin t-heA several directions.This paper, which draws
sector rises relative to the countrywide on Taylor'sdoctoraldissertationas well as a
average,but the trendis not as clear cut as number of other empirical investigations
the contrastin the cross-sectionanalysis. carriedout since publicationof the 1960 ar-
The timeseries data also indicate thatrela- ticle,makesuse of timeseriesand cross-sec-
tive product per worker in the M sector tion data for both advanced and underde-
rises generallywhereas productper worker veloped countries.Econometrictechniques
in the S sectordeclinesrelativeto the coun- are applied to test for uniformities in pro-
trywideaverage. ductionrelationsas revealed by time series
and cross-sectiondata and for systematic
Patternsof IndustrialGrowth shiftsin theserelationsover time;a success-
More recent research relating to the ful attemptis made to improve the esti-
process of structuralchange has gone be- mates of these relationsby groupingcoun-
yond merely documentingthe secular de- tries in accordance with predetermined
cline in the relativeimportanceof the agri- criteria.
cultural sector. Chenery's 1960 article on Regressionanalysiswas applied to a sam-
"Patternsof Industrial Growth" [18.] ini- ple of 54 countriesthatrangefromthe low-
tiated a series of studies aimed at estimat- est to the most developed, with advanced
ing the natureof the relationshipsbetween
1 In his monumental empiricalstudyofIndustrial
economic development and industrial Growth and WorldTrade,Maizels [81, 1963] cal-
structure.In this firststudy a regression culates similar growth elasticitiesusing cross-
model was applied to cross-sectiondata for sectiondata for 1955 (30 countries)and pooled
51 countries,using per capita income and cross-sectiontimeseriesdata forsomeof themajor
industrial forselectedyearsbetween1899
countries
population as explanatoryvariables in a forhis "food,beverages,
and 1957. The elasticities
log-linear equation; the dependent vari- and tobacco" category(1.10 for the cross-section
forthemixedtimeseriescross-section) are
ables are the shares of primaryproduction and .78 than Chenery's,but presumablythis is
higher
(agricultureand mining), industry(manu- mainlybecause his categoryincludes beverages
facturingand construction),and servicesin and tobacco.
372 Journalof EconomicLiterature
countries accounting foraboutonlya quar- to above. Whereas a small,primary-ori-
terofthetotal.The numberofobservations entedcountry in themiddleincomerange
was increasedgreatlyby poolingcross-sec- tends to have only about 60 percentas
tiondataand timeseriesdatafort-he period muchindustry as a largecountry, thediffer-
1950-63.The simplestregression uses only ence varies greatlyamongindustries. As
per capita incomeand populationas ex- would be expected,the difference is con-
planatory variables,but thefitis improved centrated in sectorsthatareparticularly af-
appreciablyin otherregressions whichin- fectedby international tradeand compara-
clude additionalexplanatory variables:the tiveadvantage.
share of grossfixedcapital formation in Certaingeneralcriticisms have been di-
GNP,theshareofprimary exportsin GNP, rectedagainstthe use of broad industrial
and the shareof manufactured exportsin categoriesin analyzingthe development
GNP. process. In the early 1950s Bauer and
A particularly interesting featureof the Yamey[7, 1951;8, 1954] and severalother
Chenery-Taylor paperis theseparateanal- authorscriticizedstudiesthbat had stressed
ysesofthreedifferent development pattems theimportance of the process of structural
whichweresuggested bya seriesofstatisti- transformation. Ruttan'ssummaryof this
cal experiments.It was foundthattherela- debate[115,1968]notesthatthecriticisms
tionsbetweenchangesin industrialstruc- ofthevalidity oftheFisher-Clark emphasis
tureand risingpercapitaincomediffer ap- on the shiftfromprimary to secondaryto
preciablyfor countriesclassifiedas: (1) activities
tertiary was directedat the arbi-
"large countries,"i.e., with population trariness of thedistinctions and thelack of
greaterthan 15 million;(2) "small coun- uniformity of the income elasticitiesof
tries, industry-oriented," i.e., with their productsin the threecategories.(In fact,
tradeorientedtowardexportsof manufac- an important reasonforthehigherincome
turedproducts;and (3) "smallcountries, elasticityof demand for manufactured
primary-oriented, i.e., withtheirtradeori- productsin aggregate wouldseemtobe the
entedtowardexportsof primary products. factthatit is a moreopen-endedcategory
The lastgroupofcountries revealsa devel- thanAll Food becauseofthealmostunlim-
opmentpatternthat is notablydifferent ited possibilityof new productsbeing
fromthe firsttwo. In thisgroup,primary added to consumption patterns; thisaspect
production (whichincludespetroleum and does notseemto havereceivedattention in
miningin Chenery'sclassification) exceeds theliterature.) It has also been notedthat
industry up to an incomelevel of nearly officialstatisticson occupationaldistribu-
$800 whereas for large countries-and tion conceal the considerableamountof
small, industry-oriented countries-indus- timespentby members offarmhouseholds
trialproductionexceeds primaryproduc- on secondary and tertiary activities-handi-
tionat incomelevelsof about$275.Vene- craftproduction in thesecondarycategory
zuela, Malaya, and Iraq, whichhave the and transportation, trading,and personal
highest indices of primaryorientation, servicesas tertiary activities.
reflectthe effectof richnaturalresources It has been further emphasizedthatthe
on production structure mostclearly. seculardeclineof agriculture has been re-
Anotherinteresting featureof this1968 latedto thefactthatcertainactivities, such
paperis a preliminary reporton theanaly- as buttermaking,have been transferred to
sis of disaggregated industrial growthpat- nonfarmenterprises, and thatmanyfarm
terns.Analysisin relationto individualin- inputsformerly producedon thefarmhave
dustriessharpenedthe differences between been replacedby off-farm inputsproduced
the three"development patterns"referred by the industrial sector.W. 0. Jones,fol-
A Surveyof Research
Johnston: 373
lowingthe tradition of Bargerand Lands- nomicdevelopment reflectedin risingper
berg'shistorical study of American agricul- capita incomes and the declinein therela-
ture,places majoremphasison this"trans- tiveshareofagriculture in nationalproduct
fer of function" aspect of the processof and laborforcehas givenriseto a number
transformation
structural [59,Jones,1970;6, of attemptsto interpret thisphenomenon.
BargerandLandsberg, 1942]. Mostinfluential in theirimpacton theideas
A recentstudyby Folke Dovring[23, of development economists and the policy
1967] has made an important contribution prescriptions that they have enunciated
by providing estimates ofthemagnitude of have been thetwo-sector or dualisticmod-
the"indirect" (off-farm) laborused forag- els thathave soughtto identify the crucial
riculturalproduction. The tremendous in- featuresof the interrelationships between
creasesin productivity offarmlaborin the agriculture, roughly equatedwiththe"sub-
UnitedStateshave,of course,been associ- sistence"or "traditional" sector,and the
atedwitha greatincreasein theuse ofpur- morerapidlygrowing "modern" or"capital-
chasedinputsand increasing substitution of ist"sectorof a developingeconomy. Atten-
capitalforlaboras thesize of thefarmla- tionis givenfirst, however,to the various
borforcehasbeendeclining. Dovring'sesti- attempts to explainthe factorsresponsible
matesof"aggregated laborproductivity" in fortheobservedchangesin industrial struc-
U.S. agriculture indicatethattheassociated turein thecourseofdevelopment.
increasein "indirect" laborinputshas been Virtually all of thewriters who have at-
surprisinglysmall.A rapiddeclineinthedi- temptedto explaintheprocessofstructural
rect (on-farm) agriculturallabor force transformation and the seculardeclinein
fromtenmillionin the1920stofourmillion the relativeimportance of the agricultural
in 1960 was associatedwithonlya small sectorhave stressedtheroleof changesin
increasein theindirect laborused foragri- the composition of demandwithrisingper
culturalproduction-from 1.5 millionman capita income[21, Clark,1957-and espe-
yearsor somewhat morein 1920to about2 ciallypp. 339-40 of the 1940 (first)edi-
millionin 1960. The greaterefficiency in tion; 101, Ojala, 1952; 66, Kuznets,1957
the manufacture of inputsobtainedfrom and 68,Kuznets1966;15,Campbell,1960].
the industrialsector,resultingfromad- Particularemphasishas been givento the
vancesin scientific knowledgeand technol- factthatthe incomeelasticity of demand
ogy,has thusbeena dominant factorin the forfoodis almostalwaysless thanone-as
remarkableincreasein aggregatedlabor impliedby Engel'sLaw-and thatit tends
productivity in theagricultural sectorofan to declineas higherlevelsofper capitain-
advancedeconomylike thatof the United comeare attained.2 Chenerysuggests, how-
States.Dovringgeneralizesthatthe high ever,thatchangesin supplyconditions re-
ratesofincreasein laborproductivity in ag- sultingfromchangesin factorcostsassoci-
ricultureare " a function of the stage of atedwithincreasesin thesizeofa country's
economicdevelopment in whichthe coun- domesticmarketare also highlyimportant
tryfindsitself. . . and oftherelativesector [18,Chenery, 1960;19,Chenery andTaylor,
proportions betweenagriculture and other
industries"[23,Dovring,1967,pp. 20,22].
2A chapteron "Factorsinfluencing the Trendof
Food Consumption" in FAO's State of Food and
II. Theoretical of theProcess
Explanations Agriculture133.] for1957, a veryusefulsummary
based on cross-sectionand time-series data for a
of Structural and
Transformation numberof countries, demonstratesthe considerable
RelatedPolicyIssues uniformity in the relationshipbetween income
levelsand food consumption patterns[see also 13,
The inverserelationship
betweeneco- Burkand Ezekiel, 1967].
374 Journalof EconomicLiterature
19681. The changes in costs are attributed differential changesin productivity, have
primarilyto scale effectsand externalities. had a significant impactin alteringthe
The increasein the size of the marketis, of composition offinaldemand.
course, a functionof risingper capita in- Some of themostimportant and contro-
comes and increased specializationand ex- versialissuesofdevelopment policyrevolve
change as well as populationgrowth. about the interpretation of the processof
Kuznets has also emphasized"the impor- structuraltransformation, involvingas it
tance of changesin theproductionor supply does therelativedeclineoftheagricultural
side in explainingchanges in the industrial sectorand the increasingly dominant posi-
distributionof totalproductamong the ma- tionof the secondaryand tertiary sectors.
jor and minor sectors . . ." [68, Kuznets, To some,thisstructural transformation is
1966, p. 104]. He suggests that the very simplya consequenceof development-of
processesof industrializationand urbaniza- theincreasein productivity and incomesin
tion have required changes on the supply thevarioussectorsof an economythaten-
side. Especially relevant in this regard is tailschangesin thepattern ofconsumer de-
the large increase in "marketingservices" mandand thecomposition ofoutput.Other
included in retailoutlaysforfood in a high- writerstake the positionthat structural
income urbanized society. Data that Kuz- transformation should be viewed not
netspresentsforthe U.S. and Sweden show merely as a consequence of development
a very sharp decline in the percentof in- butas a processthatshouldbe deliberately
come devoted to food in termsof its pri- fosteredby policymeasuresto accelerate
mary cost-its value at the farm gate or developmentand to ensurethat low-in-
point of import-whereasthere has been a come,pre-industrial societieswill succeed
considerable increase in the share of in- in realizingtheirgoalsofachieving self-sus-
come spent on the processing,transporta- tainedeconomicgrowth.
tion, and distributionof food products.In Arguments relatingto the desirability of
the U.S. during the years 1949-57, only deliberateindustrialization havea longhis-
10.4 percent of personal consumptionex- toryand have emphasizedmanydifferent
penditurewas devoted to food as a primary aspects.Giventhepossibility and the goal
inputbut 13.2 percentwas devotedto "mar- of risingper capita incomes,in whicha
keting services" with the result that food wideningrangeof nonfarm productsand
expenditureat the retaillevel accounted on servicesconstitute an increasingly important
average for 23.6 percent of private con- fractionof consumerexpenditure, increas-
sumptionexpenditureduringthatperiod,a ing relianceon importsof manufactuLred
relativelysmall decline from32.6 percentin productsfinanced by primary exports is the
1869 [68, Kuznets, 1966, p. 275]. Although onlyalternative to a domestictransforma-
some of the additionalcostsassociated with tionintheindustrial structure ofproduction.
these services were "imposed" upon con- The literaturedealingwiththe tradeas-
sumers,the growthof demand forprocess- pectsof development problemsis huge,no
ing, transportation,and distributionser- doubtreflecting thelongtradition and the
vices was also a resultof various technical highlydevelopedstate of thisbranchof
innovations and other factors that economictheory.In a paper on "Interna-
influencedconsumer preferences.Kuznets tionalTradein Agricultural Products in Re-
furtherstresses that the innovationsthat lationto Development," Tolleyand Gwyer
have changed the characterof goods and havereviewedtheliterature oftherelations
services available to consumers,as well as betweenagricultural trade and economic
changes in relative prices associated with development and have examinedsome of
A Surveyof Research
Johnston: 375
thepolicyissuesand alternatives [133,Tol- An excellent summaryand analysis by
ley and Gwyer,1967].3Meier'streatise[85, Goreux [35, 1969] of the 1967 FAO publica-
1968] on The International Economicsof tion,Agricultural
Commodities-Projections
Developmentis a veryusefulexamination for 1975 and 1985 [31, 1967], is especially
of tradetheoryand theissuesof commer- relevantto the issues examined in this pa-
cial policypertinent to developingcoun- per. Concernover relativelyslow growthof
tries,buthistreatment oftradeand agricul- export demand for agriculturaland other
turalproductsis briefand does not give primarycommoditiesoftenfiguresas a major
muchattention to thespecialproblemsas- motivationforadvocatingindustrialization.
sociatedwithheavyrelianceon agricultural Goreux's statementsuggeststhat there are
exportsin countries wherelittlestructural cogent reasons for such concernin consid-
transformation has takenplace. Caves'ses- eringexportprospectsforagriculturalprod-
say [17,1965]on"'VentforSurplus'Models ucts. On the basis of a partial updating
ofTradeand Growth" presentsa highlyin- of the projectionspublished in 1967 FAO
terestingmodel suggestedby empirical has now reached even morepessimisticcon-
studiesof Canadiandevelopment by Ha- clusions with respect to the growthof ex-
roldA. Innisand by thewell-known article portsof agriculturalproductsfromdevelop-
by Watkins[136,1963]concerning therole ing countries.In a volume settingforththe
of resource-basedexportsin stimulating main conclusionsand policy implicationsof
economicexpansionin an underdeveloped its Indicative World Plan for Agricultural
economy.A provocative featureof Caves's Development, FAO summarizesthe main
paperis an extension of themodelto ana- reasons for the very unsatisfactorypros-
lyze developments in a regionin whichan pects for agriculturalexports,stressingin-
abundantsupplyof laboris the underuti- ter alia "the progressivesaturationof per
lizedresourcethatattracts capitaland tech- capita requirements in those importing
nicalknowledgefromadvancedeconomies countriesalready in higher income levels;
because of the possibility of establishing increasein competitionfromsynthetics .. .;
plantsforlocalmanufacture ofrelativelyla- competitionfrom production in the high
bor-intensive productsat lower unit cost income countries. . . ; importduties on
thanis possiblein thedevelopedregion[17, processed products. . . ; [and] low alloca-
Caves, 1965]. This extensionof Caves's tion of foreignexchange in Zone B coun-
modelseemsespeciallyinteresting in light tries [centrally planned economies] for
ofHarryJohnson's analysisofhow"techno- importsof tropicalproducts,withconsump-
logicalgap" tradeis likelyto give rise to tion per capita frequentlyheld a long way
"low-wage" trade[49,H. G. Johnson, 1969, behind what mightbe expected fromthe
p. 23]. prevailing income level" [32, FAO, 1969,
Vol. III, p. 12]. An importantthemein this
3 MacBean's book, ExportInstabilityand Eco- FAO report,and one which is certainto be
nomic Development[80, 1966], is an important the subject of considerable controversy, is
contribution thathas becomeavailablesinceTolley
and Gwyersurveyedthe literature. MacBean's an- the importance of very substantialconces-
alysis leads him to conclude that fluctuationsin sionsin productionand tradepolicies of de-
exportearningsin developingcountrieshave not veloped countriesto facilitatethe growthof
had significantdetrimental effectswithrespectto
short-term incomefluctuations growth
or long-term agricultural export earningsof developing
of income.Maizels, in an excellentreviewof the countries.A new feature,which reflectsthe
book, sets forthin some detail why he findsthat dramaticchange in productionprospectsin
MacBean'sstatistical analysisof thosetworelation-
ships is generallynot convincing[82, Maizels, a numberof developingcountriesresulting
1968]. fromthe availabilityof high-yieldingvari-
376 Journalof EconomicLiterature
etiesof rice,wheat,and maize,is theview amination of"EconomicDevelopment with
thatthedevelopedcountries shouldmodify Surplus Labour: Some Complications,"
theiragricultural policiesin a drasticman- LloydG. Reynolds[109,1969]suggests that
ner to enable the developingcountriesto "labourslack"is perhapsa bettertermto
shiftfroma situation oflargenetimports of describe a phenomenonwhich he, like
foodgrains in the 1960sto substantial net Lewis and manyothers,regardsas an im-
exports by 1985[32,FAO, 1969,Vol.II, pp. portant featureofunderdevelopment.
540-58]. The crucialfeatureofLewis'modelis his
Another majorconsideration thathasmo- analysisof the dynamicprocesswhereby,
tivatedemphasison industrialization has givenfavorableconditions, the surplusof
been preoccupation withthe expansionof manpowerin the "subsistence" or tradi-
nonfarmemployment opportunities for a tionalsector,whichis dominatedby, but
growinglabor force.ArthurLewis' well- not confinedto traditional agriculture, is
knownarticleson "EconomicDevelopment absorbedby themodernor "capitalist" sec-
with UnlimitedSuppliesof Labour" [75, tor.Lewis'modelandmostofthbe latertwo-
1954and 76, 1958]havebeen mostinfluen- sectormodelshave emphasizedan impor-
tialin focusing attentionon thedynamic as- tantasymmetry in theproduction relations
pectsofcapitalaccumulation and growth in prevailingin the traditionaland modem
a dualisticeconomy. Lewis,whoregardshis sector,in whichthe
sectors.The traditional
modelas an updatedversionoftheclassical bulkof an underdeveloped country's labor
growthmodel,postulatedthatin densely forceis engaged,is characterized by rela-
populated underdevelopedcountrieslike tivelyprimitive techniquesof production,
India,Egypt,or theWestIndies,"thereare verylimiteduse of capitalequipment, and
large sectorsof the economywhere the low productivity. Moreover,agriculture,
marginalproductivity of labouris negligi- pettytrade,and othercomponents of the
ble, zero,or evennegative."Lewis'first ar- subsistencesectorhave a specialcharacter
ticle appeared at a time when Nurkse's as "self-employment" sectorsof the econ-
book [94,1953]on capitalformation in un- omybecause of institutional arrangements
derdeveloped countries and othercontribu- suchas thepeasantfarmhouseholdwhich
tionshad arousedgreatinterest in thephe- is botha unitof consumption and of pro-
nomenonof "underemployment" or "dis- duction.HIence,workers inthesesectorsare
guised unemployment" in agriculture. In able to eke out an existenceeven though
theirbookon The Development oftheLa- the marginalproductof somemembersof
bor SurplusEconomy,Fei and Ranis [29, the laborforcemaybe less thanthe aver-
1964] formally incorporated a stageof "re- age productwhichroughly determines their
dundant"agricultural labor characterized of
level consumption.
by zeromarginalproductivity as an impor- Employment in themodern
opportunities
tant featureof their model. Lewis and or "capitalist"sector,however,are dis-
Nurkse,however, tooka more flexibleview tinctlylimited.Productionis based upon
and theirconceptof "surplus labor" in- concentrated ownershipof capital equip-
cludedan assumption if
that, necessary, the ment and the hiringof wage labor for
effectson agriculturaloutputofthetransfer profit-making purposes.Employment thus
of farmworkersto nonfarmemployment tendsto be offeredonlyup to the point
would be offset by adjustments withinthe where the productof the last workeris
agriculturalsector,including willingness on equal to theprevailingwage rate.Andbe-
thepartoftheremaining members offarm cause capital formation in the emerging
households toworkharder.In hisrecentex- manufacturing sectorhas not proceeded
A Surveyof Research
Johnston: 377
veryfar,thedemandforlabor-determined than the essentiallyheuristicmodel pre-
by thedownwardslopingmarginal produc- sentedby Lewis. The firstof two essential
tivityscheduleof labor-willbe smallrela- differences betweentheclassicalmodeland
tiveto thelargenumberof workers in the Jorgenson's neoclassicalmodelis thatJor-
traditional sectorwho are readyto accept gensonrejectsthe possibility of redundant
employment at a wage somewhat abovethe agricultural labor and assumesthatmar-
incomelevel in the subsistencesector.In ginalproductivity of laborin agriculture is
Lewis' formulation, unlike the Fei-Ranis alwvays positive.The secondand morecru-
model,it matters little"whetherearnings in cial contrast is thathe assumesthatit is the
the subsistancesectorare determined ob- growthof an agricultural surplusthatde-
jectivelyby thelevel ofpeasantproductiv- termines therateofgrowth ofnonfarm em-
ity,or subjectively in termsof a conven- ployment.4 Sinceit is quiteobviousthat,in
tionalstandardofliving"[78, WV. A. Lewis, a givensituation, the growthof nonfarm
1968]. Ohkawa and Minamihave argued employment can be restricted by eithera
thatin Japan,untila "Lewisturning point" shortage ofcapitalor a shortageoffoodfor
was reachedin theearly1950s,the supply the nonfarm population, it is impossibleto
oflaborexceededthedemandat theindus- establishby theoretical analysiswhichwill
trialwage rateso thatthe supplyof labor be thelimiting factor.
was effectively "unlimited"even though Jorgenson's viewthata growingagricul-
therewas a secularupwarddriftofsubsist- turalsurplusis botha necessaryand suffi-
enceearnings becauseofrisingproductivity '
The fullestformulation of Jorgenson's analysis
in agriculture[99, Ohkawa and Minami, was presentedat the Conferenceon Subsistence
1964; 89, Minami,1968]. A capitalistsur- and PeasantEconomicssponsoredby the Agricul-
plus will,of course,be generatedbecause tural DevelopmentCouncil and containedin a
volumeedited by Wharton[139, 1969]. His neo-
of the intra-marginal labor employed, and classicalmodel,withslightlydifferent assumptions,
reinvestment of the profitsin subsequent was presentedin an earlierarticle[60, Jorgenson,
periodswilllead to rightward shiftsof thbe 1961]. Jorgenson'stest of the alternativemodels
which,he believes,strongly supportstheneoclassi-
marginalproductivity schedule of labor cal modeland requiresone to "reject"the classical
withtheresultthatmoreand moreworkers model,is also containedin Adelmanand Thorbecke
willbe absorbedby theexpandingcapital- [1, 1966]. Stephen Marglin'sCommentin that
volume,whichalso considersthe fullerversionof
ist sector.In fact,Lewis' principalpurpose the paper presentedat the Conferenceon Subsis-
in formulating his modelwas to providea tence and Peasant Economics,raises some very
mechanismthat would explainthe rapid cogent questionswith respectto the validityof
some of the testsapplied by Jorgenson. A major
growthof savingin nationalincomein the part of Jorgenson'stest of the surpluslabor hy-
earlystagesof development ofan economy pothesisis based upon confronting implicationsof
whose growthis due to the expansionof the classicalmodelwithdata bearingupon Japan's
historicalexperience.But Marglinargues persua-
capitalistformsof production[78, W. A. sivelythat"theimplications of the'classicalmodel'
Lewis,1968].Eventually, providedthisex- turnout on close examination to be implicationsof
pansionprocessis not cut short,"capital assumptionsJorgenson(and others)have gratui-
touslybuiltintothe model,notimplications of the
catchesup with labour supply"and the classical theory"[83, Marglin,1966]. A recent
two-sector modelis no longerrelevant. articleby Minami,which presentsa similarbut
In an ingenious and provocative theoreti- more detailed theoreticalcriticismof Jorgenson's
"tests,"notesthatseveralof the "consequences"of
a
cal analysisof dual economy,Jorgenson Jorgenson's model derivefromhis use of a Cobb-
has compared"classical"and "neoclassical" Douglas productionfunction.Minami'sarticlealso
versions.His versionof theclassicalmodel providesempiricalevidencein supportof his view
thatLewis' two-sedtormodelwas relevantto Japa-
is intendedto approximate closelytheFei- nese experienceuntila "Lewis turningpoint"was
Ranismodelwhichis morefullyelaborated reachedin the 1950s [89, Minami,1968].
378 Journalof EconomicLiterature
cient conditionfor growthof the nonfarm have argued thatin such economiesagricul-
sector leads him quite naturallyto suggest turallabor is a relativelyabundantand low
that capital investmentthat accelerates the (opportunity)cost resourcebecause of the
growthof agriculturaloutputis likelyto be slow growthof demand forindustriallabor.
importantin permitting a low-incomeecon- Thereforethe expansionof agriculturalpro-
omy to escape fromhis versionof the low duction should be based mainly on labor-
level equilibriumtrap [60, Jorgenson, 19611. intensive,capital-savingtechniques,relying
In a pair of articlespublishedin 1962,Enke heavily on technicalinnovations[54, John-
also argued that capital should be com- ston and Mellor, 1961; 87 and 88, Mellor,
bined withruralland and labor to some ex- 1966 and 1967].
tent and not be combined only with labor On the basis of historicalexperience n
that has migrated to urban industry[26, Japan, Taiwan, and other countries,it has
Enke, 1962; 27, Enke, 1962]. been suggestedthat the productivity of the
It is somewhat shockingto agricultural existingon-farmresourcesof labor and land
economiststhat general economistssuch as could be increased greatlyby technicalin-
Jorgensonand Enke have felt it necessary novations involvingas key elements: (1)
to argue the case forsome investment in ag- agriculturalresearch leading to the devel-
riculture.But it is probablytrue,as Mellor opment and selection of higher-yielding
has suggested [88, 1967, p. 25; also see 91, varieties;(2) increasedapplicationof chem-
Nicholls,1963], thatfascinationon the part ical fertilizers;and (3) the range of activi-
of a number of development economists ties that facilitatewide use of fertilizer-re-
with the concepts of disguised unemploy- sponsivevarietiesand increasedapplication
ment or underemploymentin agriculture of fertilizers,togetherwith the associated
and with labor surplusmodels has contrib- practices required to realize the yield po-
uted to a tendency"to minimize the dif- tentialof thenew varieties.
ficultproblemof how a surplusis to be ex- Emphasis on raising the productivityof
tractedfromagriculture."This preoccupa- farm-supplied resourcesis relatedto thedis-
tion with "surplus labor" often seems to tinctionthat Ohkawa makes between "in-
have encouragedneglectof the agricultural ternal"and "external"inputs [98, Ohkawa,
sector as well as a tendencyto assume too 1969]. In economies in which little struc-
readilythata surpluscan and should be ex- tural transformation has taken place, the
tracted from agriculture,while neglecting commercialmarketforfarmproductstends
the difficult requirementsthatmustbe met to be small relativeto the numberof farm
if agricultureis to play a positiverole in fa- households, thereby imposing a severe
cilitatingoveralleconomicgrowth. constrainton the use of purchased inputs.
Agriculturaleconomistswho have been Rapid expansion of cash income fromex-
influenced by insights derived from the port crops has oftenprovided a means of
Lewis two-sectormodel have argued that easing this constraint.The projectionsre-
the nature of the interrelationshipsbe- viewed earlierwithrespectto the growthof
tween agriculture and nonagricultureat agriculturalexportssuggestthatforthe de-
different stagesof developmenthave impor- veloping countries,generally,this possibil-
tant implicationsfor agriculturaldevelop- ity is not likely to alter substantiallythe
ment policy. Johnstonand Mellor, for ex- factthatthe growthof effective demand for
ample, have stressed the importanceof a farm products will be constrainedby the
particulartype of strategyfor agricultural rate of structuraltransformation, although
developmentin countrieswhere littlestruc- some individual countries may achieve
tural transformation has taken place. They rates of increase in export earnings well
Johnston:A Survey of Research 379
above the average by enlargingtheirshare portance of incentivesand the availability
in world markets.Some of the multisectoral of profitable innovations. A number of
models discussed in the followingsection econometricstudies, ably summarizedby
consider these interrelationships,but it is Krishna[64, 1967], have providedmorefor-
well to emphasize here the interdepen- mal evidence concerningthe price respon-
dence that exists between the choice of sivenessof farmersin developingcountries.5
technique in agriculture,the intersectoral The remarkable results now being
allocationof resourcesas it affectsthe pro- achieved with the high-yieldingvarietiesof
cess of structuraltransformation, and the wheat, rice, and maize have provided dra-
potentialthatexistsforenlargingfarmcash matic supportforthe view tllata large po-
incomes and foreignexchange earningsby tentialexistsfor increasingfarmoutput in
expandingagriculturalexports. the developingcountriesby technicalinno-
Those who have argued the advantages vationsthatincreasethe productivity of the
of a labor-intensive,
capital-savingstrategy farmsuppliedresourcesoflaborand land [2,
for promoting agricultural development Asian DevelopmentBank, 1969; 139,Whar-
have also emphasizedthe importanceof the ton, 1969]. Experienceleading to the devel-
potential that exists for the international opmentof the Mexican "dwarf"varietiesof
transferof technical innovations.Until a
few years ago this view was to a consider- The volumeSubsistenceAgriculture and Eco-
able extentan articleof faith,that success nomic Development[139, Wharton,1969] con-
realized by agriculturalresearchprograms tains a numberof importantcontributions which
examinethe influenceof social, institutional, and
in temperateregions could be repeated in culturalfactorsand theireffecton the motivations,
the tropical and subtropicalregionswhere values, and behavior of peasant farmers.Gelia
the contemporaryunderdeveloped coun- Castillo's delightfuland devastatingcritique of
Rogers' attemptto characterize"a subcultureof
tries are mainly located. Agriculturalre- peasantry"and Firth'sdiscussionof the influence
searchin the developingcountrieshad been of social structureupon peasant economiesare
largelyconfinedto importantexportcrops, especiallynoteworthy. A significant pointempha-
sized by Castillois thatinstancescitedto demon-
and the success achieved in developing stratethe lack of innovativeness on the part of
high-yieldingvarietiesof sugarcane,cocoa, peasant farmershave frequently been due to the
oil palm, and othertropicalplantshas been failureof researchworkersand agriculturalad-
ministrators to take account of actual conditions
cited in supportof the view that strength- and constraints at thefarmlevel.The assertionthat
ened research programs would generate "farmers are simplyresistantto change"can be a
profitableyield-increasinginnovationsap- convenientexcuseforthe failureof scientistsand
administrators to make available feasibleinnova-
plicable to the majorfood cropsof thesere- tionscharacterized by an acceptablelevel of risk
gions [84, McPhersonand Johnston, 1967]. and promising returnsthatadequatelycompensate
Accumulating evidence concerning the for the extralabor and cash outlay [16, Castillo,
1969, p. 139]. In a similarvein,Mellor[88, 1967]
responsiveness of small-scale farmers to suggeststhat "It is ironicthat the peasant is ac-
economic incentives underscores the im- cused of ignoranceof whichsocietyis guilty,"i.e.,
portance of innovations that offersome- the failureof governments in many countriesto
recognizeand act upon the opportunities forhigh
thingworthwhileto "extend."Justa decade returnsto modestsocial investment to providean
ago W. 0. Jones[57, 1960] broughttogether environment in which the peasant can be more
a persuasive collection of evidence chal- productive. Brewster'sprovocative analysis of
"traditional as barriersto change"
social structures
lenging the then prevalentstereotypecon- places majoremphasison characteristics of village
cerning"tradition-bound farmers"in tropi- societiesthatmakeit difficult to createthenetwork
cal Africa.A major contribution of Schultz's of "large-scalespecializedunitsof collectiveaction
which are necessaryfor developmentand wide-
Traditional
Transforming Agriculture
[121, spreaduse of increasingly productive technologies"
1964] is its eloquent emphasis on the im- [11, Brewster,1967, p. 67].
380 Journalof Economic Literature

wheatthatare now givingspectacularre- fertilizers.Declining real prices have con-


sultsin India,Pakistan, and othercountries tributedto the enormousincrease in fertil-
is a strikingillustrationoftheopportunities izer production and consumptionin the
forinternational transfers of technologyin years since World War II, and further
theagricultural field.The majorgeneticre- highly significantcost reductions are in
searchand plantbreedingworkon these prospectand will undoubtedlycontributeto
dwarfvarietieswas carriedout as partof the currentrapid expansionof fertilizeruse
the cooperativeresearchprogramof the in the developing countries [103, OECD,
Rockefeller Foundationand the Mexican 1968; 117,Sahota, 1968].
govemment (now beingcontinuedwitha Two otherfeaturesof this type of yield-
worldwidemandateby the Intemational increasing innovation have been stressed
CenterforMaize and WheatImprovement because of their economic significance.
with headquartersat Chapingo outside First is the fact that being highlydivisible
MexicoCity).Th-eincredibly rapidsuccess and neutralto scale, theycan be readilyin-
in developinghigh-yielding varietiesof corporatedinto existingsystemsof small-
"dwarf"rice at the International Rice Re- scale agriculture[see, forexample: 96, Oh-
search Institutein the Philippineswas kawa, 1964 and 88, Mellor, 1967]. The
again based on a plantbreedingstrategy high-yieldingvarietiesof rice,however,re-
aimed at developingstiff-strawed varieties quire controlledirrigationor exceptionally
that would not lodge and which would well distributedrainfallso that investment
have favorable grain/fertilizer response in water controlfacilitiesis oftena neces-
coefficients evenat veryhighlevelsof fer- sary conditionfor realizing theiryield po-
tilizerapplication. Boththericeand wheat tential[45, Hsieh and Ruttan,1967].
programshave benefited fromthe success The second and closelyrelatedfeatureof
of agricultural scientistsin identifyingthe these innovationsis that this type of inten-
genesthatdetermine photoperiodism since sification of agricultural production can
thishas made it possibleto selectvarieties make a notable contributionto the problem
adaptedto a broadrangeof environmental of absorbinga rapidly growinglabor force
conditions. into productiveemployment[98a, Ohkawa
For bothcrops,applicationof improved and Johnston,1969 and 88, Mellor, 19671].
culturalpractices-almost alwaysincluding Growingrecognitionof the impactof rapid
sharply increaseduse ofchemicalfertilizers population growthon the size of the farm
and frequently pesticidesas well-is a nec- labor forcehas been an importantconsider-
essarycondition forrealizingthe yieldpo- ation underlyingthe emphasis on promot-
tentialofthenewvarieties. Thereis a large ing a labor-intensive expansionpath forag-
technicalliterature dealingwiththesede- riculturalproduction.Althoughthe contrast
velopments, but the highlightsare well in growthpaths in Japan and the U.S. as
summarizedin a paper by Harrar and analyzed by Hayami and Ruttan [41, 1970]
Wortman[38,1969] and in theRockefeller is striking, therateof growthof Japan'spop-
Foundation'sAnnualReports,Progressin ulation and labor force was moderate.Al-
the Agricultural Sciences[110, 1967]. The though the farmlabor force in Japan did
significance of these fertilizer-responsive, not begin to decline until the 1950s,it did
high-yielding varietiesis enhancedenor- not experiencethe growththat is such an
mouslyby the progressin fertilizer manu- importantfeature of developing countries
facturing technologies, and in miningtech- today. In an influentialarticlepublished in
nologiesand successesin mineralexplora- 1959, which reviews the historicalexperi-
tionthatare loweringthecostof chemical ence in a numberof countrieswithrespect
A Surveyof Research
Johnston: 381
to changesin total-farm, and nonfarm la- projectto promotestudyof the employ-
borforce-Dovring emphasizes thatmostof mentimplications of thepopulationexplo-
the contemporary underdevelopedcoun- sion; the reviewof the employment prob-
trieswill experiencelargeincreasesin the lem in developingcountriesby Turnham
sizeoftheirlaborforcesbeforetheabsolute and Jaegercited above is one of several
numbersengagedin agriculture will begin studiesstemming fromthatprojectthatare
to decline[22, Dovring,1959]. When the alreadyavailable.There seemsin fact to
farmlaborforceinitially weighsveryheav- have been a shiftin thefocusofdiscussion
ilyin thetotallaborforceand thetotalla- of problemsof unemployment and under-
borforceis increasingrapidly,nonfarm em- employment duringthepast fewyears.At
ploymentwould have to increaseat an the same timethattherehas been a reac-
impossiblyhigh rate to absorb fullythe tionagainstthe earlierviewswithrespect
annualadditionsto thetotallaborforce. to theexistence ofredundant laborin agri-
As a consequenceof theratherhighde- culture,therehas been a considerable in-
gree of capital intensity characteristicof crease in attention to problemsof unem-
muchof the investment in industry in the ploymentand underemployment in urban
underdevelopedcountries,tlle rate of areas. A 1968 articleby Lefeber [72.],
growthof nonfarm employment appearsto forexample,putsfortha sophisticated ar-
be veryslow even in countries wherethe gument for wage subsidies as a means of
rateofcapitalformation in industryis very accelerating therateof growthof employ-
rapid [134, Turnhamand Jaeger,1969; 4, mentin a "surpluslaboreconomy." A great
Baer and Herve,1966; 52, Johnston, 1966 deal of attention has also been given to
and 1969). Judging by the experience of a problemsof urbanunemployment in parts
numberof developingcountries, a rateof of tropical Africa where the so-called
increaseofnonfarm employment of4.5 per- "<schoolleaverproblem"has attractedthe
cent per year mustbe regardedas very attention of politiciansas well as research-
rapid.But if thefarmlaborforceinitially ers [see, forexample,14, Callaway,1962].
accountsfor80 percentofthetotal,and the Althoughthese areas are not usually
laborforceis growingat 3 percentannu- thoughtof as "surpluslabor economies,"
ally,the farmlabor forcewould increase thereis increasingawarenessthat abun-
threefold and wouldstillaccountfornearly dance of agricultural land is notas univer-
60 percentof the total at the end of 50 sal as was supposed.It has also been sug-
yearsin spiteofgrowth ofnonfarm employ- gestedby Helleiner[42, 1966] that as a
mentat a rateof4.5 percent.Hence,meas- resultof populationgrowthformer'land
uresto bringabouta reduction oftherate surplus"economiesare tendingto become
of populationgrowthhave an important 'laborsurplus" economies, partlybecauseof
bearingon problemsof agricultural devel- tribalrestrictions thatlimitaccessto avail-
opmentand economicgrowthbecause of able land.Of greaterimportance, no doubt,
theiremployment implications as well as is the factthatthe excesssupplysituation
themoreobviouseffect ofrapidpopulation in urbanlabormarkets is relatedto exces-
growthon thedemandforfood[20, Chris- sive incomedifferentials betweentherural
tiansen,1966]. populationand workers in themodernsec-
The rapidratesof growthof a country's tor.In manycountries, especiallyin Africa,
labor forcethatare concomitant to rapid earnings ofmodernsectorworkers areoften
populationgrowthhave been receiving in- threeor fourtimesas muchas theaverage
creasingattention.The OECD Develop- small farmer's incomeand are associated
mentCentrehas initiateda majorresearch withthe rationing of a limitednumberof
382 Journalof EconomicLiterature
jobs in the modern sector. [134, Turnham on the interrelatedproblemsof "education,
and Jaeger,1969, pp. 36-38 and 131, To- employment,and rural development"was
daro, 1969,p. 144]. Althoughlittleresearch not in Asia but in East Africa.The proceed-
has been done on this phenomenon,the ings volume of the so-called Kericho Con-
large differentialsare commonlyattributed ference held in Kenya in 1966, containsa
to trade union pressures, governmentsym- numberof valuable papers,includinga use-
pathyfor the trade union cause, minimum ful summarychapter by Guy Hunter, an
wage legislation, politically determined analysis of "Projected Changes in Urban
wages of government workers which exerta and Rural Populationin Kenya and the Im-
strong influence on wages in the private plications for Development Policy" by
sector,and the sensitivity of large firms,es- Etherington,a discussionof "The Genera-
pecially expatriatefirms,to accusations of tion of Employmentin Newly Developing
paying"substandard"wages. Countries"by Harbison,and a verypercep-
Particularlyrelevantin the presentcon- tive analysisof "FarmerTrainingas a Strat-
text is the fact that in this situationa sub- egy of Rural Development" by Jon Moris
stantialpart of the "residual"labor forceis [123, Sheffield,1967]. F. X. Sutton,in a
to be found,not in agriculture,but in the chapterdealing withforeignaid in relation
ranks of urban unemployed and urban to problemsof employmentin rural devel-
workersekingout an existenceas casual la- opment,identifiesthe tendencyof foreign
borers,pettytraders,or in similarpursuits. donorsto preferlargeand well-defined proj-
Todaro has presentedan interestingmodel ects ratherthan diffusedones or a number
which seeks to explain urban unemploy- of small projectsas a factorwhichprevents
mentand underemployment on the basis of capital assistance fromhaving as great an
thecombinedeffectoftwo factors-themag- impact in enlargingemploymentopportu-
nitudeof urban-ruralwage differentials and nitiesas would be possible with moreflexi-
the probabilitythat a migrantto the urban ble aid programs.He also believes the ef-
labor pool will succeed in findinga job in fect of foreignassistance on education to
the modernsector[131, Todaro, 1969]. One have been substantialand findsit highly
implicationof themodel is thatmeasuresto significant in overcoming shortages of
raise farmincomes and to increase the at- skilled manpowerthat have tended to bias
tractivenessof rurallivingare an important planners toward capital-intensivedevelop-
means of reducing the flow of rural mi- ment projects [127, Sutton, 1967, pp.
grantsto congested urban slums, with at- 474-79].
tendant social and political problems.An- In the same volume R. II. Greenpresents
otherimplicationis thatwage subsidiesfor a provocative analysis of "Wage Levels,
workersin the modernsector"mightin fact Employment,Productivityand Consump-
exacerbatethe problemof urban unemploy- tion."Especially pertinentis his observation
ment" [131, Todaro, 1969, p. 147n; see also that "Sustainable levels of public services
40, Harris and Todaro, 1968]. Researchbe- depend very heavily on wage and salary
ing carried out in Kenya by Todaro, John levels because these constitutethe bulk of
Harris,and Henry Rempel at the Institute costs while revenues tend to be relatively
forDevelopment Studies in Nairobi should inelastic" [36, Green, 1967, p. 216]. If a
provide some badly needed empirical evi- country'sstrategyfor agriculturaldevelop-
dence on thevalidityof Todaro's model and ment is to emphasize measures to increase
otherdimensionsof the problem. factor productivity,the strengtheningof
Interestingly enough,the site of the most supportinginstitutions such as thoseforag-
importantconferenceheld to date focusing riculturalresearch, extension,and farmer
A Surveyof Research
Johnston: 383
trainingis of criticalimportance.The cost agriculturalsector's contributionin Japan
of such programswill, however,be unduly to financinginvestmentin infrastructure
burdensomeif t-heincome differentials be- and industryand in providingfundsforthe
tween governmentemployeesand the rural expansion of education and other govern-
population are excessive. Green notes that mentalservices[100,Ohkawa and Rosovsky,
in additionto the large differential
between 1960; 106, Ranis, 1959; 126, Smith,1959; 50
incomes in the modern and rural sectors, and 51, Johnston,1951 and 1962). In more
thereare also undulylarge differentials be- generalterms,Kuznets [67, 1961,p. 115] has
tween salaries and wages: in East Africa emphasized that "One of the crucial prob-
membersof a small and relativelywell-paid lems of moderneconomicgrowthis how to
salaried group are "receivingan ever in- extractfrom the product of agriculturea
creasingshare (already over 40 percent) of surplus for the financingof capital forma-
total wage-salarypayments.. . ." He con- tionnecessaryforindustrialgrowthwithout
cludes that "Unless salary scales for new at the same time blightingthe growthof
entrantsare lowered and incrementalrates agriculture,underconditionswhereno easy
reduced, East Africawill be unable to af- quid pro quo forsurplusis available in the
ford the increase in high-levelmanpower country."Although the land tax has re-
employmentconsistentwith rapid develop- ceived particular attention as a transfer
ment"and that a general situationof large mechanismbecause of its importancein Ja-
and widening income differentials"could pan, S. R. Lewis [74, 1967, p. 460] points
also give rise to exceedinglydangerousten- out thattaxationis onlyone of threemecha-
sions between a small, relativelywell-off nismsby which the agriculturalsector can
wage labour forceand thebulk of thepopu- provide investmentresources for the non-
lation"[36, Green,1967,pp. 219, 228]. Rene agriculturalsectors: "(1) privateindividu-
Dumont's vigorouscritiqueof development als in agriculturecan investin the nonagri-
policies in tropical Africa in his L'afrique culturalsector; (2) the governmentcan tax
noire est mal partie also emphasizes this the agriculturalsectorto provideinfrastruc-
theme [24, Dumont, 1962; 25, English edi- tureforthe nonagricultural sectors;(3) the
tion,1966].6 level of real income can be raised to pro-
A finalaspect of the interdependencebe- vide more profitsin the high-savingsector
tween agricultureand non-agriculture that of the economyby termsof trade more fa-
has received much attentionconcernsthe vorableto industry."
intersectoralflowsof capital and otherre- The usual view thatthereshould be a net
sources between agricultureand the non- flowof capital fromagricultureto industry
agriculturalsectors.Ohkawa [96, 1964] has in the earlierstages of developmenthas re-
argued that it is misleadingto speak of ag- cently been challenged. Ruttan and Ishi-
riculture's"contributions"to development kawa in particularhave argued [114,Ruttan,
(since it is moreappropriateto considerthe 1966 and 47, Ishikawa, 1967] that because
interdependencebetween sectors), but he of the rapid growthof demand forfood re-
accepts the term as applicable to the net sulting from high rates of population in-
flow of resources to the more rapidly ex- crease, it is likelythat the agriculturalsec-
panding sectors. And Ohkawa and many tor may require a net flowof capital from
othershave stressedthe importanceof the the industrialsector.The extentto which it
is feasible and desirablefordevelopmentto
6This is only one of a numberof themespre- be characterizedby a net flowof resources
sentedin thishighlyunevenbut challengingand
book by Dumont. See also the review
influential from the agricultural to the nonagricul-
articleby JohnHarris[39, 19681. turalsectorswill, of course,depend on par-
384 Journalof EconomicLiterature
ticularcircumstances. To the extentthatit changingrole of foreigntrade,althoughhe
is possibleto achieveincreasesin agricul- stressesthat these are not historicalstages
turaloutputby raisingfactorproductivity, but "merelya way of distinguishing the sit-
the capitaland foreignexchangerequire- uations in which an economymay findit-
mentswithinagriculture are reducedand self"[77, W. A. Lewis, 1966,p. 38].) Perkins
the feasibilityof suchresourcetransfers is and Witt, Johnstonand Mellor, and Hill
increased.T. H. Lee's studyofintersectoral and Mosher have all made use of a se-
capitalflowsin Taiwanstressestheimpor- quence of three phases in theirrespective
tanceof an efficient approachto increasing attemptsto analyze the process of agricul-
agriculturalproductivity and output in tural development in the course of eco-
makingpossiblethenettransfer fromagri- nomicgrowth[105, Perkinsand Witt,1961;
culture to nonagriculture that occurred 54, Johnstonand Mellor,1961; 44, Hill and
throughout theperiod(1895 to 1960) that Mosher, 1962]. Wharton,in a synthesisof
he examined.Lee's studyis important for those approaches, has suggested ten char-
itsconceptualframework foranalyzing sec- acteristicsthatundergomajor change as an
toralinterrelationshipsbetweenagriculture agriculturaleconomy moves from Stage I
andnonagriculture as wellas fortheempiri- (Static) throughState II (Transitional) to
cal evidenceonTaiwan'sexperience [70 and Stage III (Dynamic) [137, Wharton,1963].
71,Lee, 1968and 1970]. Ruttan has criticizedthose growthstage
In situationswherethereareexcessivein- theoriesalong withthe well-knowntheories
comedifferentials betweentheruralpopu- of List, Fisher and Clark, and Rostow.
lationand wage eamersin themodernsec- List's five-stageclassificationseems archaic
tor,however,thereis a presumption that today, but other elements in his analysis
resourcesare beingtransferred fromagri- have a contemporary ring.As Ruttanpoints
cultureto thebenefit of salariedpersonnel out, "He regarded domestic industrialde-
and wage earnerswithresultsthatseem velopmentas the mostimportantgenerator
difficultto justifyin termsof equityor the of agriculturalprogressbecause of the dou-
attainment of development objectives.As ble impactresultingfrom(a) theincreased
StephenLewis has observed,in countries demand forfarmproductsfroman expand-
where industrialwage levels have risen ing nonfarmsector and (b) the develop-
veryhighrelativeto agricultural incomes ment of more efficientmethodsof produc-
"consciousefforts to transferincometo the tion resultingfromthe application of sci-
high-saving sectormayresultin largewind- ence and technology"[115, Ruttan,1968,p.
fallsto thoselaborerswhocan findemploy- 4]. In Rostow's five stages of economic
mentat highurbanwagelevels,ratherthan growth,agriculturehas an importantrole to
in greatlyincreasedsavings"[74, S. R. play; in fact,agricultureor anotherprimary
Lewis,1967,p. 462n]. industrymay act as a leading sectorin the
transitionfrom a traditionalto a modern
III. Criticismof GrowthStageModels economy[112, Rostow,1960]. Johnstonand
A numberof the models considered Mellor'sdelineationof threephases is influ-
above can be describedas "growthstage" enced by Rostow's stages in concept and
or "Phase"models.Lewis'two-sectormodel terminology, but they are more specificto
phase;whencapital
relatesto a transitional agricultureand are in essence a typology
"<catchesup" withlaborsupplythetwosec- related particularlyto the degree of struc-
tormodelis no longerrelevant.(His 1966 tural transformation that has taken place
treatiseon development planningsuggests [86, Mellor, 1962, p. 711]. Phase II, which
fivestagesof development relatedto the followsa period in whichthe preconditions
A Surveyof Research
Johnston: 385
whichmakechangepossiblearefulfilled, is culture(actually"foodproduction")will
characterized by expansionof agricultural dependon (1) theinitialshareofthelabor
outputbased on labor-intensive, capital- forcein eachsector,(2) theincomeelastic-
savingtechniques, together withthenorma- ity of demandforfood and forall other
tivepropositionthatthereshouldbe heavy goods,and (3) theratesofincreasein pro-
relianceon technological innovations. Their ductivity in each sector[56, Johnston and
Phase III, in whichexpansionof agricul- Tolley,1965,pp. 372-75].In an earlierpa-
turaloutputis based on capital-intensive,per whichfocuseson the U.S., Tolleyand
labor-savingtechniques, is relatedtoa situa- Smidtpresenta morecomplicatedmodel
tionin whichagriculture no longerbulksso that takes accountof changesin relative
largein the economyand the opportunity prices,the determination of marginalpro-
costoflaborhas risensubstantially. oflaborand capitalbya produc-
ductivities
Ruttancriticizesgrowthstage theories, tion function, the influenceof purchased
and dual economy modelsas well,primarily inputs,and the contributions of transfer-
because they are lacking in analytical ringlowproductivity laborin agriculture to
power.He rightly emphasizestheneed for non-agricultural employment witha higher
growth modelswithgreateroperational rel- marginalproductivity[132, Tolley and
evancefordevelopment policy.In hisview Smidt,1964].In a highlysimplified but in-
such modelswill have "to provideforfor- teresting analysis,Mellorgives an indica-
mal interaction betweenthe agricultural tion of how the agricultural price level
and nonagricultural sectorsthroughagri- would changewith different rates of in-
culturalproductsmarkets, the markets for crease in outputand with alternative as-
the manufactured inputsused in agricul- sumptions concerning the rate of increase
turalproduction, labor markets,the land in demand[88,Mellor,1967,pp. 28-32].
markets,capital markets,and consumer A numberof othermodelsare verysug-
goodsmarkets." Moreover, the need is for gestivealthough theycertainly do notfulfill
an analyticalframework forempiricalre- the exactingrequirements stipulatedby
searchaimedat obtainingestimates of the Ruttan.In particular, mentionshouldbe
valuesto be assignedto the variablesand madeofmodelsdevelopedby Ohkawa[95,
parametersapplicable to specificecono- 1961], Krueger[65, 1962], Ishikawa [47,
mies,and thusto providea basis forpro- 1967],and Gutman(with a mathematical
jecting the quantitativeeffectsof the appendixby Black) [37, 1957]. Mention
manipulationof alternativeinstitutional shouldalso be madeofa ratherinteresting
variables[115,Ruttan,1968,pp. 19-20]. sketchof a five-sector model (domestic
Effortsto elaboratemore sophisticated food, cash exportcrops, nonagricultural
modelshavenotyetadded muchto thein- private,government, restofworld)by Tol-
sights derived from good historicalstudies ley and Gwyer, but it is onlyused as an ex-
and heuristic modelssuchas Lewis' classic positorydevice [133, Tolley and Gwyer,
treatment or the highlysimplified analysis 1967,pp. 412-15].Perhapsthemostelabo-
of interdependence and
by Johnston Niel- ratemodelforthe analysisof intersectoral
sen [55, 1966] whichignorestheeffects of relationships in a developingeconomyis
in
changes price levelsand in productivity. onepresented byThorbecke andField [130,
Tolley has derived a model that allows for 1969]. This modelis especiallyinteresting
the changes in labor productivityin agri- becauseofthedissaggregation intoagricul-
culture and nonagriculture and which ture,manufacturing, services,and foreign
shows how the annual percentage change tradesectors.Moreover,the coefficients of
in the proportionof the populationin agri- the model are estimatedon the basis of
386 Journalof EconomicLiterature
data forArgentinaand Peru, and an inter- tween agricultureand industry.The inter-
estingattemptis made to considerhow cer- relationshipsbetween choice of strategyfor
tain strategiesare suggestedby the model. agricultureand the growthof opportunities
This model is certainlya promisingand for productive employment,which were
suggestiveapproach,but in his commenton noted brieflyin Section II, are then exam-
the paper, C. W. Reynolds questions ined in somewhatmoredetail. To providea
whetherthe model has been developed to a theoreticalframeworkfor examiningsome
pointwhereit adds verymuchto the source of the indirectrelationshipsbetween agri-
materialon sectoraldevelopmentin the two cultural and industrialdevelopment,con-
economies [108, Reynolds,1969]. siderationis given to HarryJohnson'sview
of the process of economic developmentas
IV. Agriculture-Industry Interactionsand a generalized process of capital accumula-
FutureResearchNeeds tion (broadly conceived) and to Nathan
Certain distinctive features of the Rosenberg'srelatedpropositionsconcerning
problems facing the developing countries the importanceof feedback effectsassoci-
underscorethe importanceof researchlead- ated with different patternsof resourceuse
ing to deeper understandingof the interac- on futuregrowth.Afterconsideringsome of
tions between agriculturaland industrial the interactionsbetween agriculturalex-
development.The prospectthat unemploy- pansion and developmentof the capabili-
ment and underemploymentwill become ties of an indigenousmanufacturing sector,
increasinglyseriousduringthe next two or a few finalobservationsare made concern-
three decades (as a resultof the combina- ing the natureof futureresearchneeds.
tion of a rapidlygrowinglabor forceand a Some of the best empiricalresearchrelat-
pervasive bias toward a capital-intensive ing to the interactionsbetween agricultural
patternof investment)is one of the critical and industrialdevelopment has been di-
problems that needs to be illuminatedby rected at testingthe validity of Schultz's
better understandingof agriculture-indus- "industrial-urbanhypothesis" which em-
tryinteractions underthe unique conditions phasizes the spatial aspect of the relation-
confrontingthe contemporarydeveloping ships between particular industrial-urban
countries. centers and the surroundingagricultural
This is an area of researchthat is on the community[119, Schultz,1953]. W. H. Nic-
frontierof economicsin a twofoldsense. A holls' recentresearchon Brazil has applied
numberof the importantquestionshave not an analyticalframeworkthat derives from
yet been conceptualized satisfactorily, the Schultzhypothesisand whichwas elab-
much less answered.*And it is an area in orated by Nicholls and A. M. Tang in their
which the really interestingand important studies to test the hypothesisin the south-
problemsextendbeyond the boundaries of easternU.S. [92 and 93, Nicholls,1961 and
economicsas conventionally defined. 1969; 128, Tang, 1958].
Attentionwill be given firstto T. W. G. E. Schuh's critiqueof Nicholls' paper
Schultz's industrial-impact hypothesisand on "The Transformation of Agriculturein a
some criticalcommentson that hypothesis Semi-IndustrializedCountry: The Case of
by G. E. Schuh that suggest that it is of Brazil" contains an excellent summaryof
somewhatlimitedvalue in illuminatingthe Schultz'shypothesisand of the varioustests
major problemsthat confronta countryat thathave been applied to it by Ruttan[113,
an early stage of development.This is fol- 1955], Bachmura [3, 1956], Sisler [125,
lowed by a brief review of Paul Bairoch's 1959], Sinclair [124, 1957], and Bryant[12,
very differentanalysis of interactionsbe- 1966], in addition to the work by Nicholls
A Surveyof Research
Johnston: 387
and Tang [118, Schuch, 1969]. The indus- velopmentin the less developed countries
trial hypothesisas advanced by Schultz is receive scant atten-
these interrelationships
related to his concernwith the persistence tion.Th-iscontrastis especiallystrikingin a
of substantialregionaldisparitiesin therate recently published volume, Economic
and level of developmentin Americanagri- Growth in Agriculture,which brings to-
culture. The hypothesis is conveniently gether essays dealing with the U.S. and
summarizedin threepropositions:(1) eco- with problemsof agriculturaldevelopment
nomicgrowthoccursin a specificlocational in low-incomecountries.His papers dealing
matrix; (2) the centersof growthare pri- with agriculturalproblemsin the U.S. con-
marilyindustrial-urban in composition;and tain numerous referencesto the need "to
(3) economicorganizationworksbest at or provide nonfarmjobs forthe excess supply
near the centerof a particularmatrixof de- of labor in agriculture"[122, Schultz,1968,
velopmentand also works better in those p. 130]; but the vastlymore difficultprob-
partsof agriculturesituatedfavorablyin re- lems associated with "the excess supply of
lationto such a center[115, Ruttan,196,8,p. labor in agriculture"in underdeveloped
5; 118,Schuch,1969,p. 381]. countriesreceiveno attention.And thetreat-
The earlier studies relatingto regionsin mentin his Transforming Agri-
Traditional
the eastern United States tend to confirm cultureis confinedto refutingthe extreme
the hypothesis,but subsequent studies by versionof the view that thereis a surplus
Sislerand Bryant,which extendedthe anal- of labor in the agriculturalsectorin under-
ysis to include the entire country,found developed countries,i.e., the doctrine of
that the hypothesiswas not borne out by agriculturallabor of zero marginal value
the data fromwest of the Mississippi.Par- [121, Schultz,1964,Chapter4].
ticularlyrelevantin the presentcontextis Schultz has also gone ratherfarin deem-
the fact that Schultzwas analyzingagricul- phasizing industrializationas an essential
tural problemsof a highlydynamic,grow- elementin the economic growthof under-
ing economy,albeit one characterizedby developed countries[120, Schultz,1956 and
substantialregionalincome disparities."He 122, Schultz, 1968, pp. 191-218). Schuh's
was not concerned,"as Schuh points out, paper referredto above makes a highlyin-
"with the problem currentlyreceiving so terestingobservationthat may throwlight
much attention in developing countries, on this apparent asymmetryin Schultz's
whichis how agriculturecan be made more treatmentof agriculturein high- and low-
productiveso that it can contributeto the income countries.He notes that the frame
industrialdevelopmentof the country"[118, of referencefor Schultz's industrialimpact
Schuh, 1969,p. 383]. And Schuh goes on to hypothesis"is such tlhatcausalityflowsfrom
question certainaspects of Nicholls' analy- industrialization, as a process exogenousto
sis of Brazilian experience because of his agriculture"[118, Schuh,1969,p. 383]. That
doubts about the relevance of the Schultz is, he was consideringthe problems of a
hypothesisin the Braziliancontext. matureeconomyin whichthe existenceof a
It may also be mentionedat this point dynamic industrialsector could be taken
thatthereseems to be a notable anomalyin for granted.But in Brazil,and stillmore in
Schultz'sown work. His Economic Organi- underdeveloped countrieswhere consider-
zation of Agriculture,publishedin 1953 and ably less structural transformationhas
mainlyfocused on the U.S., gives major at- taken place, the criticalproblem is to ini-
tention to the interrelationships between tiate and nurturea process of industrializa-
general economic growth and agriculture tion. It is true that S-aoPaulo, the focus of
whereas in his treatmentof agriculturalde- attentionforNicholls' Brazilian study,now
388 Journalof EconomicLiterature
has a dynamic,rapidlygrowingindustrial economicgrowthin those two countries.
sector[93, Nicholls,1969]. Accordingto One ofthemajorconclusions ofhisstudyis
Schuh,however,"Agriculture contributed thatefforts to fosterindustrial development
heavilyto thedevelopment oftheindustrial in the contemporary underdeveloped econ-
complexofSao Paulo.Notonlydidthegov- omiesmust"seekto createfavorableinter-
ernmenttransfer substantialcapital from actionsbetweenindustry and agriculture"
agricultureto industrythroughan inge- [5,Bairoch,1964,p. 210].
nious use of multipleexchangeratesand Bairochalso examinesa numberof fac-
outright confiscationof exchangeearnings, torsthatweakenthe operationof the"dif-
but agriculturalentrepreneurs also invested fusionmechanisms" thatwere historically
ratherheavilyin theindustrial sector"[118, so important in translating an initialim-
Schuh,1969,p. 384]. This is, of course,in pulse,notablythe increasein agricultural
sharpcontrast to theframeof reference of productivity, intoa processof cumulative
Nicholls'testof the industrial impacthy- economicgrowthin the countriesof the
pothesisin theTennesseeValleywhere"ag- West and Japan.In additionto the prob-
ricultureat thebeginning of the studype- lemsassociatedwithrapidgrowth ofpopu-
riodwas largelystagnant, and a processof lationin today'sunderdeveloped countries,
industrializationwas imposedfromtheout- he calls attention to a numberof unfavor-
side largelyas an exogenousshockon the able factors whichweakentheoperation of
system" [118,Schuh,1969,p. 383].Therele- thediffusion mechanisms thatwereimpor-
vance of theforegoing questionsis height- tantin the nineteenth centuryand which
ened by the fact that,as Ishikawahas suggestthatthereis particular need today
pointedout,the analyticalframework un- to pursuepoliciesthat will intensify the
derlying the"RegionalEconomicReporton positive, growth-promoting interactions
Agriculture"recentlypublished by the betweenagricultural and industrial devel-
Asian DevelopmentBank in the Asian opment.The unfavorable factorsthat he
Agricultural Surveyis verysimilarto that emphasizes[5, 1964,pp. 73-741are:
utilizedby Schultzin Transforming Tradi- (1) Increasein disparity betweentradi-
tionalAgriculture [2, ADB, 1969;48, Ishi- tionaland moderntechnologies The rela-
kawa,1969].Thusthbis veryimportant state- tivelynarrowgap in thenineteenth century
mentis characterized by similarstrengths betweenthenewtechnologies andtheskills
and shortcomings. ofblacksmiths, tinkerers,watchmakers, and
Paul Bairoch'sstudyof theinterrelation- othertraditional artisansmeantthatlocal
ships betweenagricultural and industrial production could be initiatedon the basis
development in Englandand France and of imitating a fewprototypes withperhaps
therelevanceofthatexperience to contem- a modestamountofprivate"technical assis-
poraryunderdeveloped countriesoffers an tance."The importance of thisfactoris at-
interestingcontrast to theviewpoint repre- testedby therelatively slightimportance of
sentedby Schultz'sindustrialimpacthy- machineryimports by late-developing
pothesis.His historicaltreatment empha- countries of westernEurope,and evenJa-
sizesthatcausalityflowedfromagriculture pan. Today's more sophisticated technol-
to industry,and a good deal of evidenceis ogies, heavilybased on modernscience,
marshalledto supporttheview thatan in- also implymuch highereducationalre-
crease in agriculturalproductivity and quirements.
growthin demandforagricultural inputs (2) Theincreaseintheamountofinves.t-
suppliedby industry weremajorforcesthat mentper workerassociatedwithpresent-
gave impetusto theprocessof cumulative day technologies The average capital in-
A Surveyof Research
Johnston: 389
vestment per workerrequiredin the early turalequipment, (c) therewas a minimum
nineteenth centurywas equivalentto four favorableimpacton local subsistence agri-
months' wages in the U.K. and sixto eight culturebecauseplantation techniqueswere
months'wages in France.In the U.S., in oftennot susceptibleto beinggeneralized
1953, the investment per workerrepre- withinthe local agricultural economy, and
sented29 months'wages,and in a contem- frequently increaseddemandforfoodwas
poraryunderdeveloped country the invest- metbyimports, and (d) therewas weakin-
mentrequirement per workeris equivalent centiveforcreationof local industries for
to some350months' wages. processingagriculturalraw materialsor
(3) Predominanceof large-scale,cen- minerals.7
tralizedfactoriesThe small-scaleand de- (7) Excessiveincome differentials be-
centralized locationsof industrial factories tweenthe traditional and modernsectors
in thenineteenth century weremuchmore Social welfare legislationand concepts,
favorableto the "diffusion mechanisms" earlydevelopment oftradeunions,and the
thatwerecriticalin launching a cumulative "conscience" of foreignfirms have resulted
processofeconomicgrowth. in excessivedifferentials betweenwages in
(4) Greaterdifficulty in therecruitment themodemsectorand the generallevel of
and training oftechnical workers and entre- productivity in the low-incomeeconomy.
preneursRecruitment and training of tech- Reducedprofits curtailtheabilityofindus-
nicalworkersand entrepreneurs foran ex- trialfirmsto financeexpansionout of re-
pandingindustrial sectorwerefacilitated by tainedprofits, and artificiallyhigh wages
themodesttechnological gap to be bridged encourage an inappropriate degreeof capi-
and by the widespreaddistribution of in- tal intensity.
dustrywhich meant that recruitment of Although thefactors emphasized byBair-
technicians and entrepreneurs forthe new och are extremely suggestive,theirimpor-
tasksof an industrialsocietycould draw tancehas not been testedempirically and
froma verybroadbase. are ad
they essentially hoc propositions un-
(5) Reducednaturalprotection The re- related to a theoreticalframework. The
ductionin costsof transportation and the generalcapital-theoretic approachto the
protection that thosecosts afforded, both analysisof economicgrowthoutlinedby
internallyand internationally, has greatly HarryJohnsonas a basis for a dynamic
increasedthedifficulty of establishing new theoryof international economicrelations
industrieswithinan underdeveloped coun- offers insightsthatare extremely pertinent
tryand in variousregionswithinsuch a to our understanding of agriculture-indus-
country. tryinteractions.In thisapproachdifferences
(6) Bias tow-ard relianceon agricultural in the endowment ratiosof capitalto la-
exportsThe reduction in costsof transport bor are the fundamentaldifferentiating
has also contributed to what Bairochre- characteristic that determines patternsof
gardsas an "excessive" development of ag- production and trade,providedthat"capi-
ricultural
exports whichhas tendedto have tal" is conceivedof in a broad sense and
adverseeffecton the diffusion process,es- "labor"in a narrowsense. In thisbroad
peciallywhenexportproduction was con- conceptionof capital, Johnsonincludes
centratedin foreign-owned plantations: not only physicalcapital equipmentbut
(a) profitswereoftenexportedinsteadof
beingreinvested in the expansionof local 'The problems that characterizeagricultural
economiesdominatedby plantationsoperatedby
industries,(b) expatriatefirmsdepended multi-nationalcorporationshave been examined
uponforeignsourcesof supplyforagricul- in somewhatgreaterdetailby Beckford[9, 1969].
390 Journalof Economic Literature

also natural resources, social capital, hu- Vernon Ruttan stressaspects of marketing
man skills, and the technical and organi- policy thatare highlypertinentto thisview
zational knowledgeaccordingto which the of the developmentprocess.Thus Jones[59,
human and materialfactorsof production 1970] emphasizes that in choosingpolicies
are combined in the production process. withrespectto agriculturalmarketing, con-
Labor, on the otherhand, is conceivedof in siderationshould be given to the ways in
the narrowsense of the availabilityof hu- which different typesof marketingarrange-
man time [49, Johnson,1969, pp. 9, 15]. mentsfosteror impede the processof evolv-
Withinthisconceptualframework, he char- ing the increasinglycomplex network of
acterizesthe processof economicgrowth economic exchangethatis an essentialfea-
as a generalized processof capitalaccumu- tureof a modern,market-oriented economy.
lation,thatis,ofinvestment in theacquisition In an analysis of agriculturalproduct and
of largerstocksof thevariousforms of capi- in Southeast Asia, Ruttan
tal; and the condition of being"developed" factor markets
consistsof havingaccumulated,and having [116, 1969] concludesthattraditionalprod-
established socialandeconomic
efficient mech- uct marketsperformreasonably well but
anismsformaintaining and increasing large
stocksofcapitalperheadinthevarious forms. thatmarketsforfarminputsare poorlyde-
Similarly, the condition of being"under-de- veloped and inefficient.8 His tentativeex-
veloped"is characterized bythepossession of planationof this dichotomyin marketper-
relativelysmallstocksof thevariouskindsof formanceis that existingdistributionchan-
capital,and theexistence of relatively
weak
and inefficient mechanisms for maintaining nels are effectivefor transmitting price in-
and increasing thosestocks,particularly of formationbut ineffectivefor transmitting
inefficientmechanisms for coordinating the the more complex technical knowledge
growth of thevariousformsof capitalso as
tokeeptheratesofreturn onthemroughly in concerningthe characteristicsand use of
alignment, and highenoughto encourage ac- new inputs.The learningrequirementsfor
cumulation [49, Johnson, 1969,p. 91.
effectivedistributionof almost totallynew
That "the mechanismsfor coordinating itemssuch as chemicalfertilizersand insec-
the growthof the various formsof capital" ticides are certainly considerable. Diffl-
-are generally inefficient is not surprising. culties are compounded because initially
There are both inherentproblemsand spe- demand will oftenbe limited,and the sea-
cial shortcomingswithindeveloping coun- sonalityof demand complicatesthe problem
triesthatmake it difficult to coordinatethe of ensuringthat supplies are available on
growthof physical capital and investment timeand in the rightplace.
in knowledge productionand in the crea- Beyond the problems of achieving effic-
tion of human capital "so as to keep the ient market mechanisms, however, "the
rates of returnon them in alignment,and process of growthwill be stronglycondi-
high enough to encourage accumulation." tionedby the natureand qualityof political
Althougha competitivemarketsystemcan decisionsin the relevantareas, and also by
be a valuable mechanismforguidingmany the extentto which the workingsof market
allocation and investmentdecisions, "im- decision processes fall shortof optimality"
provementof the degree of integrationof because of such problems as externalities
the [market] systemand of the quality of [49, Johnson,1969,pp. 9-10]. In additionto
the informationit generates and dissemi- the familiarconsiderationswhich account
nates is itselfpart of the process of eco- for the fact that investmentdecisions with
nomic development"[49, Johnson,1969, p.
8
9]. In addition to the literatureon agricultural
marketing reviewedby Ruttan,reference shouldbe
Recent essays on agriculturalmarketing made to recentstudiesbyLele [73, 1968] and Jones
in developingcountriesby W. 0. Jonesand [53, 1969].
Johnston:A Survey of Research 391

respectto public utilitiesand othertypesof Also pertinentto questionsrelatingto ag-


infrastructure are either taken by govern- riculturalstrategyand the process of struc-
mentor stronglyinfluencedby government turaltransformationis Rosenberg'semphasis
policy, investmentsin knowledge produc- on the special importanceof the capital
tion and in the creationof human capital goods producing sector and "its role as a
also depend heavilyon government decision- source of new technologyappropriateto a
makingprocesses.And because of the spe- country'sfactorendowment. . ." [111, Ro-
cial featuresofthelattertypesofinvestment, senberg,1964, p. 71]. He suggeststhat the
the likelihoodof underinvestment and mis- degree of developmentof this sector is a
allocationof resourcesforthese purposesis criticalfactoraccountingfor differences in
considerable. the growthperformanceof industrialecon-
Viewing growthas a process of capital omies and "primaryproducingcountries"in
accumulationin thisbroader sense also un- which little structuraltransformation has
derscores the importanceof two proposi- takenplace:
tions that Nathan Rosenberg has stressed. It is probablethatone of the mostimportant
Althoughhe does not minimizethe impor- factorscontributing to the viabilityand flexi-
tance of the problemof maximizingoutput bilityof industrialeconomiesis the existence
of a well-developedcapital goods sectorpos-
froma fixedstock of resources,Rosenberg sessingthe technicalknowledge,skillsand fa-
stressesthat to understandthe problem of cilitiesforproducingmachinery to accommo-
date the changingrequirements of productive
growthof output over time "we are com-
activityplus the abilityand the incentivefor
pelled to considernew problems of a sort raisingproductivity of machineryproduction
which are not illuminatedby static analy- itself-therebyreducingits costand encourag-
sis" [111, Rosenberg,1964, p. 61]. He em- ing its furtheradoption.Herein may lie the
mostimportant feedbackofall whichis central
phasizes that since economic growthis in to explainingthe differences in behaviorbe-
many respectsa learningprocess in which tweenindustrialand primary producingecon-
omies.Industrialsocieties,throughthbe role of
the human factoracquires new skills,apti- theirhighlydevelopedcapital goods produc-
tudes, and aspirations,it is importantto have, in effect,internalizedin
ing industries,
considerthe effectsof a numberof feedback theirindustrialstructurea technologicalca-
pacitywhichundertakestechnological change
mechanismson the productivityof the hu- and adaptationalmostas a matterof course
man agent. He suggeststhat theremay be and routine.Under-developedeconomies,of
importantdifferencesbetween agriculture course,importmuch of their capital goods
from abroad, but this expedient deprives
and manufacturing,or between different themof a learningexperiencein the produc-
types of manufacturingor agriculturalac- tion, improvementand adaptation of ma-
tivity,in the kindsof qualitativechangesin chinerywhich may be vital to economic
growth[111, Rosenberg,1964, p. 71].
the human agent that are generated and
thereforein the impactof different patterns It is apparentthatforcountriesin which
of resource use on productivitychanges little structuraltransformation has taken
overtime.9 place, the agriculturalstrategyadopted will
have a majorinfluenceon the "feedbackef-
'Similarpropositions are emphasizedby Baldwin fects"and "diffusionmechanisms"that de-
[5a, 1963I in his analysisof the impacton devel- termine whether there will be strong,
opmentof different typesof exportindustries.He growth-promotinginteractions between
notes,for example,that expandingproductionof
agriculturalexportcrops has relativelywide de- agricultural and industrial development.
mand repercussionsin bringingpeople into the This suggeststhat decisionswithrespectto
moneyeconomy, whereasmineralindustrieshave a the design of an appropriatestrategyfor
morefavorableeffecton the development of labor
skills,but thisimpactdoes notextendmuchbeyond agricultureshould take account of factors
theexportindustry itself. that tend to be ignoredwhen "Transform-
392 Journalof EconomicLiterature
ing TraditionalAgriculture" is viewed in The tremendously importantyield-in-
isolationratherthanas a partof thebasic creasinginnovationsrepresentedby the
problemof"Transforming Traditional Soci- new varietiesofwheat,rice,and maizeac-
eties." companiedby heavierapplicationof fertil-
A majorconclusionsuggestedby Harry izer are, as notedearlier,neutralto scale
Johnson's analyticalframework and by the and therefore enhancethe prospectsfor
provocative ideas putforth by Bairochand achievingincreasesin farmoutputby a la-
Rosenberg is thatthepatternofindigenous bor-using,capital-savingexpansionpath.
manufacturing activitywill exerta power- The substantial substitutability offactors in
fulinfluence on the"generalized processof agricultural production andthepotential for
capital accumulation" and the growthof increasing factorproductivity are,however,
outputand employment. Particularly im- dependent uponthebroadstrategy adopted
portant inthepresentcontext is thefactthat forsector-wide programs. Government pol-
thestrategy foragriculture willhaveimpor- icies and programsaffecting factorand
tantindirecteffects on theabilityof devel- productpricesand thequantity and quality
opingcountries to absorba rapidlygrowing of resourcesdevoted to agriculturalre-
laborforceintoproductive employment as searchand extension will be of majorim-
well as important directeffects relatedto portance.Research,extension,and credit
thechoiceoftechniquewithinagriculture. arrangements gearedto theneedsof small-
Althougheconomists commonly stressa scale farmers withlimitedcapacityto em-
trade-off betweenoutputand employment ploypurchasedinputsare particularly im-
objectives, theredo notappearto be inher- portantexamplesof programsthat will
ent reasonsfor seriousconflictbetween affect thefactorproportions thatcharacter-
thoseobjectiveswithinagriculture.10 With ize theagricultural sector's expansion path."
a broad-thrust approachto increasingthe It is sometimes arguedthatthereis no
outputand productivity ofthegreatmajor- need to be concernedwiththe effectsof
ityof a nation'sfarmers by labor-intensive, 11
In his introductionto the proceedingsvolume
capital-saving techniques, a growinglabor of the Universities/NationalBureauConference on
forcecan be absorbedintoproductive em- The Role ofAgriculture in EconomicDevelopment,
ploymentin agriculture even thoughthe Thorbeckeargues that "The macro-economic im-
in termsof employment creationand
underlying man/landratiois unfavorable. plications,
income distribution,of different techniquesand
In Taiwan,forexample,as a resultof the combinationsof inputsshould be analyzed care-
combinedeffect of higheryields,improved fullyto determinethe possibilityof conflictsthat
mightarisein the pursuitof staticeconomiceffici-
irrigation and expandedmultiplecropping, ency, on one hand, and long-runeconomicand
and enlargedproduction of highervalued social development, on the other"[129 Thorbecke,
crops,it has beenpossibleto reduceunder- 1969,p. 6]. He also suggeststhatsuchanalysishas
lagged by comparisonwith the notable progress
employment in agriculture significantly and thathas been made in recentyearsin our under-
to raiseincomesperfarmworker in spiteof standingof the interacting microeconomic factors
a reductionin the averagefarmsize [71, that are criticalto the expansionof farmoutput.
The Literatureof Agricultural Planning,a small
Lee, 1970,Chapter4]. book by Gittinger[34, 1966] whichis considerably
broaderin its coveragethanthe titleimplies,is a
10The conflictmay,however,be seriousforpar- very useful survey of the literatureon factors
ticularcrops.It appearsthattheforcesthatlead to affectingthe expansionof farmoutput.Reference
the adoptionof capital-intensivetechnologiesare should also be made to a numberof excellent
especially strong for export-oriented sugarcane papers by YujiroHayami and Vemon Ruttan,in-
productionbecause of technicalcharacteristicsof cludingthe forthcoming articleon the influence
of
the crop,theinfluence of tradeunionsor minimum relativefactorprices on patternsof productivity
wage legislationon thepriceoflabor,and theneed growthin Japan and in the U.S. that was men-
to keep exportpricescompetitive. tionedin SectionII.
A Surveyof Research
Johnston: 393
prematureinvestment in labor-displacing has emphasized, fundsat thedisposalofthe
techniquesin agriculturebecause rural centralgovernment are oftena particularly
publicworksprograms offera readysolu- scarceresource.13
tionforproblems ofunemployment and un- The indirecteffectsof a country'sap-
deremployment whichmightbe aggravated proachto agricultural development on the
by suchinvestments. Othersadvocatesuch processof structural change and on the
programs as an additionalmeansofexpand- growth ofnonfarm outputand employment
ingemployment opportunities inruralareas are relatedto thepatternof incomedistri-
andbecauseoftheusefuladditions toinfra- butionand the composition of rural de-
structurethat can resultfroma public mand.Althoughthe aggregatedemandof
worksprogram. In areassuchas East Paki- ruralhouseholdsfornonfarm productsis
stanwheretheproblems ofruralcongestion constrained by thegrowthoffarmcashin-
are especiallyacuteand difficult to relieve come,the typeof ruraldemandforinputs
by expansionofemployment in agriculture and consumer goodswilldiffer according to
or in nonfarm industries,thereis a strong the typeof agricultural strategyadopted.
case forusingresources to employruralla- Logic and historical evidencesuggestthat
bor on thistypeof program.But someof the nature of this rural demand will,
the resourcesso employedmayhave high through its effectson theleveland compo-
opportunity cost,and a long-runsolution sition of investment in thenonfarm sectors,
mustdepend upon expansionof nonfarm influence the magnitude ofthe effectsofag-
outputand employment.
The FAO reporton an IndicativeWorld Alan DevelopingCountries:The AnalyticalIssues" by
Peacock and Keith Shaw which also notes
PlanforAgricultural Development suggests the reasons why a Keynesian-typeincrease in
thatbecauseof themagnitude of thelabor effectivedemandis unlikelyto be a feasiblerem-
forceabsorptionproblemconfronting edy foremployment
less tries problemsin developingcoun-
[104, Peacock and Shaw, 1969].
developedcountries, "reallymajorpublic The only referenceto the financingof public
worksprogramsin ruralareas shouldbe worksin the FAO reportis the statement(p. 26)
givenveryhighpriority." The reportgoes that "The food elementin labour costsmightbe
paid in kindfromdomesticproductionas soon as
on toarguethat agriculture becomescapable of meetingthe inter-
nal demand." This anachronisticsuggestionpre-
public worksprogramscould use resources
that would outherwisego to waste to help sumablyreflectsthefactthatmostprograms of this
naturelaunchedin recentyearshave utilizedaddi-
build irrigationworks,roads,communications tionalresourcesmade availablein theformof food
systems,schools,hospitals,etc.-in fact the aid underbilateralprogramssuch as P.L. 480 or
whole infrastructure that is so basic to eco-
nomic development.. . . They would raise throughtheWorldFood Program.In an interesting
demand for agriculturaland nonagricultural workingpaper on the effectsof foodaid on capital
products and animate the whole economy formation and employment in NorthAfrica,Kahn-
which oftenlacks more than anythingelse ert and Carmignaniquestionwhetherit is really
thestimulation ofsustaineddemand[82, FAO, necessaryto rely on distributionof food in kind
1969, Vol. I, p. 26]. even when the supplementary resourcesare pro-
vided as food aid [61, Kahnertand Carmignani,
This statementhas been singledout as an 1969].
13Ishikawaarguesthat centralgovernment pro-
exampleof a commontendencyto gloss gramsshoulduse government subsidiesor loans to
over the fiscalproblemsposed by large exertleveragein mobilizinglocal investment and
publicworksprograms. Surelythisis one manpowerresourcesso as to maximizethe "invest-
areain whichthereis likelyto be an impor- ment-inducement coefficient."With regardto the
choice betweenmajorand minorirrigation works,
tant trade-offbetween employment and he suggeststhatsmall projectshave an important
As Ishikawa[47, 1967]
outputobjectives.12 advantagebecausefarmers see a directbenefitand
easierto raise the partof the funds
it is therefore
paper
'1 This pointis elaboratedin a preliminary required as a local contribution[47, Ishikawa,
on "Public Finance and EmploymentCreationin 19671.
394 Journalof EconomicLiterature
riculturalexpansionon the growthof non- farmcash income associated with the new
farmemploymentand output. high-yieldingvarietieshas, however,given
Given the great importanceof agricul- a considerableimpetusto tractormechani-
ture in the economies of developing coun- zation in India, West Pakistan,and certain
triesthat have experiencedlittlestructural otherdevelopingcountries.And discrepan-
transformation, it is almost certain that cies between the privateand social profita-
theseindirecteffectswill be of considerable bility of investmentin this type of labor-
importance.The propositionsput forward saving farmequipmenthave contributedto
by Nathan Rosenberg suggest that sig- the rapid increase in tractorsin the past
nificantfeedback effectswill be associ- few years. In studiesfocusingon the situa-
ated with the sequence in which mechani- tion in West Pakistan,Kaneda [62, 1969]
cal innovationsare adopted and the typeof and Bose and Clark [10, 1969] have sug-
demand for farmequipment that is gener- gested that these discrepanciesare the re-
ated. The growthof thisdemand is likelyto sult of: (1) marketwage rates forfarmla-
exerta particularlysignificantinfluenceon bor that overstatethe opportunitycost of
the developmentof metalworking firmsand labor, (2) the underpricingof capital (of-
on the growthof the capital goods produc- ten associatedwithan overvaluedexchange
ing sector. rate), and (3) the factthatthe social costs
In one of the few studies of this type of of exacerbatingproblemsof unemployment
interactionbetween agriculturaland indus- and underemployment, because alternative
trial development,Falcon has noted that job opportunitiesare not available for the
rapid expansion of private tubewells in labor thatis displaced, do not enterthe cal-
West Pakistangave a strongstimulusto the culus of individual farmoperators.An ad-
growthof local machine shops [28, Falcon, ditional factor that has probably contrib-
1967]. This experiencewas in markedcon- uted to this tendency toward premature
trastwiththe public tubewellprogramthat tractormechanizationis the high level of
utilized larger and more sophisticated technical efficiencyof tractorsand tractor-
equipment that was mainly imported so drawn equipment which embody an enor-
thatthe linkageeffectswere slight. mous amountof researchand development
Little attentionhas been givento thefac- activitycarriedout in developed countries.
tors that have limited the growthof local This historicalexperience of Japan and
manufactureand widespread use of types Taiwan seems to suggest that an agricul-
of farmequipment suited to environments turalexpansionpath thatgeneratesa broad
where the opportunitycost of labor is very demand for relativelysimple implements
low, but where adoption of new technolo- has importantadvantages. It not only re-
gies may nonetheless require improved duces the foreignexchangerequirementsof
equipment to ease seasonal bottlenecksor expanded farmoutput but also maximizes
permitmore effectiveperformanceof cer- the positive interactionsbetween agricul-
tain operations.(The new wheat varieties, tural and industrialdevelopmentand thus
for example,are very sensitiveto depth of contributesto more rapid growthof non-
planting.) Historically, the reliance on farm output and employments.Improved
primitivetypes of equipment such as the but inexpensiveequipmentsuch as bullock-
"stickplow" made by a farmerhimselfor drawn plows and cultivators,seed drills
by a village artisan has probably been with fertilizerattachments,and stationary
mainlya result of the lack of cash income threshersare generallyproduced by a large
and the desireto minimizeuse of "external" numberof small firmsthatmake maximum
inputs. The rapid increase in output and use of domesticresources(includingother-
Johnston:
A Surveyof Research 395
wise untapped sources of capital). This dual patternof industrialdevelopment.
type of growthof manufacturing leads to a There seems to be a growing recogni-
broad diffusionprocess that maximizesthe tion that the import substitutionpolicies
opportunitiesfor "learningby doing" and adopted in manydevelopingcountrieshave
thuspromotesthe developmentof entrepre- impeded the kind of structuralchange re-
neurial and technical skills in the metal- quired for sustained growthand have ag-
working firmswhich play such a critical gravated problems of unemploymentand
role in the assimilationof increasinglycom- underemploymentbecause they have re-
plex technologiesand in adapting them to sulted in underpricingof capital and over-
local conditions.The importanceof a broad pricingof labor [79, Little, Scitovsky,and
and evolutionarydevelopmentof technical Scott, 1970]. In analyzing the effectsof
and managerial capabilities is underscored such policies in the Philippines,J.William-
by Kilby'sexaminationof the evidence per- son [140, 1969, p. 107] notes the similarity
tainingto the performanceof entrepreneurs between his findingsand those of Henry
in less developed countries.He findson the Brutonand otherswho have focused their
basis of his own field studies and the re- attentionon Latin America.Williamsonem-
ports of other investigatorsthat entrepre- phasizes that in the Philippinesproductiv-
neursin developingcountriesare highlyre- ity-increasing improvementswere impeded
sponsive to economic opportunities, willing and local firms"had little incentiveto in-
to risk theirown capital in long-termven- vest in the necessaryresearchand develop-
tures, and adept at marketing.There are, ment required to adapt capital goods im-
however,seriousand persistentdeficiencies ports to Philippine conditions."Moreover,
in the way that entrepreneursin these "incentiveswere increasinglyin favor of
countries performtheir roles relating to horizontalresource dispersionwhile back-
management control and technological ward linkagesintoparts-supplying and cap-
efficiency [63, Kilby,1970]. ital goods industrieswere penalized." Other
The parallel developmentin Japan and factorsof greatimportancewere the effects
Taiwan of a "semi-modern" sectorof small- of an overvaluedexchangerate,"incredibly
scale firmsusing labor-intensive,capital- low interestrates" that were offeredto fa-
savingtechniquesalongsidethe growthof a vored industriesby governmentfinancial
modern sector of large, capital-intensive institutions, and "highwages fosteredby an
firmsin those lines of productionin which ill-advisedgovernmentwage policy,"all of
economies of scale are of decisive impor- which encouraged the firmsto substitute
tance was facilitatedby several factorsiD capital for labor to a far greater degree
additionto the stimulusof ruraldemandfor than was justifiedby prevailingfactorpro-
inputsand consumergoods producedby the portions[140, Williamson,1969,p. 107]. In
semi-modernsector [97, Ohkawa, 1965; 52, describingthe compositionof output that
Johnston,1966]. Organizational arrange- emerged,he quotes Brutonin characteriz-
ments, such as subcontractingbetween ing it as "so alien to factorendowmentsthat
large-scale enterprisesand small factories full utilizationof existingcapacity came to
or household workshops,made it possible depend more,not less, on the constantflow
forthe latterto expand as efficient and via- of imports."The net effectof the policymix
ble unitsutilizingtechniquesappropriateto was to impede the pace of industrialization
the factor proportionsobtaining in Japan because intermediateand capital goods in-
[102, Okita, 1964]. The spread of transport dustrieswere penalized, the transferof la-
facilities and the availability of electric bor fromagricultureto nonagriculturewas
power in rural areas also facilitatedthis slowed, and "these policies set domestic
396 Journalof EconomicLiterature
consumergoods demandas the ceilingto The fundamental problemthey face, as
industrialization"[140,Williamson, 1969,p. Guy Hunterhas emphasized, is "to bridge
108]. thegap betweenthe16thand20thcentury"
Muchofthediscussion in thissection, in- by pathsthatwill be uniquein important
cludingHarryJohnson's conception of the respectsand whichmustbe traveledmuch
processof economicgrowthas "a general- morequicklythanthedevelopedcountries
ized processof capitalaccumulation," em- pursuedtheircourseof economicmodern-
phasizesthatmanyof theimportant issues ization.Althoughthe task that confronts
of development policylie in thedomainof thesecountries is one of modernizing soci-
politicaleconomywhich modernecono- eties in whicha large part of theireco-
mistshave tendedto eschew.This view of nomicactivity is based on techniques more
thedevelopment processposesan awkward akin to 16th than 20th centuryEurope,
challengeforeconomicresearch. In empha- "theyare surrounded by the 20thcentury,
sizingthe pervasiveinfluenceand impor- notthe16th."The disadvantages ofthelate
tanceof changesin institutions, in knowl- developingnationsarise in part because
edge and skills,and in organizational effici- theyare "bedeviledby inheriting or adopt-
ency,it suggeststhe need fora varietyof ingideasand standards developedfromthe
approachesto research. Thereis,of course, quite different experience,circumstances
a continuing needforanalysisofratesofre- and needs of the world-dominating indus-
turnon investment and oftheroleofprices trial civilization"[46, Hunter,1969, pp.
offactors and products. Pricedistortions of- 19-201. The technologiesavailable often
ten have been an important factorimped- do not suit theirneeds. Institutions and
inggrowth and structural change,and rela- standards ofwelfareevolvedfromtheexpe-
tivepricesand marketmechanisms are an rienceand needs of the richestcountries
importantpart of the "diffusion mecha- have been introducedwithoutsufficient
nisms"requiredto stimulate and sustainthe criticalreevaluation and adaptation to local
growth process. But much more is involved conditions on thepartofforeign advisersor
because development, in contrast to eco- domesticdecision-makers. Alongwiththose
nomicgrowthmore narrowly defined, is by disadvantages, however,the contemporary
itsnaturea broadprocessof social change developingcountries have enormously im-
and modernization. Nothingillustrates this portantpotentialadvantagesin the accu-
moreemphatically thanthesimplefactthat mulatedknowledgeof modemscienceand
unlessthereis diffusion of theknowledge, technology. Thereis a vast rangeof tech-
attitudes,and motivation thatwilllead to a nologiesand a varietyof institutional in-
loweringof birthrates withina reasonably ventionsand organizational devices from
shortperiodof time,any set of economic whichto choose,and muchof thiscan be
policiesis certaintofail. adaptedto theirneeds.A fundamental diffi-
HarryJohnson's analysisrightlyempha- culty,however,is the verymultiplicity of
sizesthatthe"mechanisms forcoordinating the optionsavailable combinedwith the
thegrowthof thevariousformsof capital' constraints imposedby shortages of capital
involvemorethansimplyrelyingon exist- in all its formswhichseverelylimitthe
ing marketmechanisms, and the sortof amountofinvestment andthenumber ofin-
feedbackmechanismsstressedby Rosen- novations thatarepossibleat anyone point
bergappearto be of greatrelevanceto de- in time.Hence,theproblemsof choice,of
visingpoliciesthatdo justiceto theunique timing, and of sequenceare of criticalim-
problemsand opportunities that confront portance.
the contemporary developingcountries. The uniquefeatures andspecialcomplex-
A Surveyof Research
Johnston: 397
ityof thecontemporary problemsof devel- a usefultechniquemightbe "a computer-
opmentemphasizethe need foringenious ized version of old-fashionedRicardian
and imaginative techniquesto studysome arithmetic," i.e.,simulation runsusingillus-
of the criticalproblemsconfronting the trativerangesof values forthe key vari-
late-developing countries.In theirthought- ablesin thesystemto permitexploration of
fulessay"On theEpistemology oftheInex. theinteracting effects
of changesovertime
act Sciences,"Helmer and Rescher [43, in a numberof variables[109,L. G. Rey-
1959]emphasizethatin thesocialsciences, nolds,1969,pp. 98-100].
especially,the interpretation of directevi- A numberoftheimportant problemareas
dence such as thatprovidedby statistical needto be illuminated by economists work-
samplesmustbe tempered by reference to ing in cooperation withspecialistsin other
backgroundinformation. In the studyof disciplines, or at leastgivingseriousatten-
problemsin the inexactsciences,which tion to the technicaland institutional di-
wouldbe epitomized by someofthedevel- mensionsof the problembeingstudied.A
opmentissuesconsidered in thispaper,we criticalneed in manycountries is forstud-
are "constantly faced with situationsin ies to determinewhether"adequate"re-
which statisticalinformation mattersless sourcesare beingallocatedto agricultural
thanknowledgeof regularities in the be- researchand whetherthoseresourcesare
haviorofpeopleorin thecharacter ofinsti- beingdirectedtowardproblems ofprimary
tutions,such as traditions and customary importance. Researchis also neededto as-
practices, fashionsand mores,nationalatti- sess the effectiveness of institutional ar-
tudesand climatesof opinion,institutional rangements forimplementing programsof
rules and regulations, group aspirations, agricultural development, giventheadmin-
and so on." Theyalso stress"thegreatim- istrative capacityofthegovernment service
portanceattachedto expertsand expertise and otherfeaturesof the situationrelated
in thesefields" becausetheexpertcan draw to thestagein whicha country, or district
upon a large stockof backgroundknowl- withina country, findsitselfin bridging
edge and a refined sensitivityas to itsrele- "the gap betweenthe 16thand 20thcen-
vance and to the weightthat shouldbe tury."Othertopicsthatmeritconsideration
givento theindirectevidenceprovidedby includeinvestigations of existingtax sys-
generalbackground knowledgerelativeto temsand possiblechangesthatwillenlarge
directstatisticalevidence.Although theline tax revenueswithoutseriouslyimpairing
between"vaguenessand vacuity"may be productionincentives;detailedstudiesof
thin,itis significant
because"reasoned meth- backward and forward linkagesand of the
of
ods explanation and prediction" can be sort of "feedback effects" emphasizedby
appliedin our pursuitof a betterunder- Rosenberg and of ways in which theymight
standingof the world [43, Helmer and be strengthened; studies of land reform that
Rescher, 1959,pp. 30,381.Amongthemeth- take accountof the politicaland adminis-
ods that they proposefor dealing more trative realitiesthatwilldetermine whether
effectively with the problemsassociated a reform as actuallyimplemented will be
with inexactnessthey place considerable beneficial or harmful.14 In manydeveloping
emphasison simulation techniques. The use 4 Raup's broad-ranginganalysisof land reform
of such techniquesis centralto an in- and agricultural development and thecomments on
triguing idea advancedby LloydReynolds his chapterby ThomasCarrolland R. P. Dore sug-
to facilitateanalysisof alternative patterns gesta numberof important issuesthatcall forfur-
therresearch[107, Raup, 1967]. The recentbook
ofchangein outputand employment andin on land reformby DoreenWarriner[135, 1969] is
theirsectoraldistributions.He suggests that a good exampleof the applicationof thehistorical
398 Journalof EconomicLiterature
countries,the greatest deficienciesin AmericanAgriculture, 1899-1939:A
knowledgerelateto such basic information Study of Output, Employment and
of employment
as statistics its
and occupa- Productivity. New York, 1942.
tionaldistributionand ofcropareas,yields, 7. BAUER,P. T. and YAMEY, B. S. "Eco-
and output.To someextenteconomists can nomic Progressand Occupational Dis-
helpto offset theseproblemsby organizing tribution,"Econ. J., Dec. 1951.
sample surveys.The greatestneed, how- 8. , "FurtherNotes on Economic
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sequenceto be followedin enlargingthe tion,"Econ. J., March 1954.
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ernmental data-gatheringactivities. AgriculturalResource Use and De-
The generalproposition, ofcourse,is that velopment in Plantation Economies,"
researchshouldbe informed by an under- Social and Econ. Stud.,Dec. 1969.
standingof the characteristicsof thecoun- 10. BOSE,S. R. and CLARKE, E. H. II, "Some
triesbeingstudiedand of thefundamental Basic Considerationson Agricultural
problemswhichtheyface. In my opinion Mechanizationin West Pakistan,"Pak-
the choice of researchtopics should be istan Dev. Rev., Autumn1969.
guidedmoreby a judgment as to thesignif- 11. BREWSTER, J.M. "Traditional Social
icanceoftheproblemthanwhether it hap- Structuresas Barriersto Change," in
pens to be amenableto the techniquesof H. M. SouTi7woRTH and B. F. JOHN-
economicand statistical analysiscurrently STON, eds., AgriculturalDevelopment
in voguein developedcountries. and EconomicGrowth.Ithaca, 1967.
12. BRYANT, W. K. "Industrial-Urbaniza-
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