Research on effects of integration of primary, secondary, and tertiary industries in rural areas of developing countries: an approach of rural capital subsidies

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ABSTRACT We set up a four-sector general equilibrium model and a rural industrial integration indicator to investigate impacts of capital subsidies given to capital-using sectors in rural industrial chain on rural industrial integration and social welfare. Our findings are as follows: Rural capital subsidies can enhance rural industrial integration (but need to satisfy certain conditions in the short-run) and reduce the economic gap between urban and rural areas. In numerical simulation part, we discover that capital subsidy for rural secondary industry has a more favourable impact on rural industrial integration, social welfare, and narrowing urban–rural economic gap than rural tertiary capital subsidy.