Technology in agriculture and structural change: an Asian perspective

Abstract

ABSTRACT Structural change is important in the overall development process. This paper seeks to examine how productivity growth in agriculture influences this process. In particular, technology in agriculture is divided into two types: labour using, land saving (biochemical) and labour saving, land using (mechanical). Some have argued that only labour saving (mechanical) technology promotes the shift of labour into manufacturing, not labour using (biochemical) technology. However, estimations utilizing data from 10 Asian nations indicate that both types of technologies promote structural change. Thus, investments in such technologies will promote structural change. Additional results indicate that labour productivity growth in services is complementary to structural change. In addition, openness to trade and foreign direct investment and diversification away from natural resource abundance as well as avoiding exchange rate overvaluation also promote structural change.