The case for industrialization of an agricultural country

Abstract

We may conclude as follows: 1. A comparative advantage in agriculture, if it exists, does not necessarily warrant complete specialization in agriculture in the best interests of an expanding country. The technical rate of substitution between agricultural and Industrial products is only one among several considerations that should enter into a decision to keep on specializing in agriculture or to move towards industrialization. 2. The case for keeping on specializing in agriculture is strongest if the expected demand for exports of agricultural products from the country is perfectly elastic at a terms of trade favourable to agriculture. Even in this case, with a long-term multi-period plan, concentration of investment in agriculture throughout the plan-period is not necessarily the best policy if rate of saving in industry is higher than that in agriculture. 3. With a downward falling export demand function for agriculture, even in a short run one-period plan, a move towards industrialization may be warranted depending on the relative values of the ‘constants’ of the planning model. These values can even be such as to call for a halt to agricultural expansion altogether and concentration ofall investment in industry. 4. With the export demand function falling downward thevolume of resources planned for investment has a significant role in dictating the direction in which expansion should be planned.Greater the volume of investment, i. e., faster the rate of growth of real national income planned, stronger is the case for industrialization in a one-period as well as in a multi-period plan. This incidentally has interesting bearing on flows of large foreign aid from advanced to underdeveloped countries.