Abstract
ABSTRACT In this article, we reconsider the work of Matsuyama (Journal of Economic Theory, 58(2): 317–334, 1992). Matsuyama (1992) concluded that, for a small open economy, a negative relationship exists between agricultural productivity and economic growth. Our study questions Matsuyama’s (1992) conclusion. We aim to demonstrate a theoretical possibility in which Matsuyama’s (1992) conclusion for a small open economy does not always hold. We extend Matsuyama’s (1992) model by introducing government services that enhance household utility. Unlike Matsuyama’s (1992) model, our model implies that, even in a small open economy, under certain conditions, a positive relationship may exist between agricultural productivity and economic growth when a small country initially has a comparative advantage in agriculture.
Published Version
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