Abstract
As urban private capital enters the modern agriculture industry, it divides the agricultural sector into the modern sector and the traditional sector. This chapter establishes a general equilibrium model to study the economic impact of governmental policies aimed at promoting modern agriculture. The main conclusions of this chapter are that interest subsidies implemented by the government to promote modern agriculture can reduce the transfer of labor from the rural areas to the cities, but encourage the movement of rural labor to the modern agricultural sector. Conversely, wage rate subsidies for the modern agricultural sector will lead to rises in the urban unemployment rate and a decrease in the quantity of labor in the traditional agricultural sector.
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