The Productivity of the Human Agent in Agriculture: An International Comparison

Abstract

The underlying structural and historical forces which are responsible for this disparity are, I am sure, familiar ground for most of you. The economic environment is characterized by (1) a rapid rate of technological progress and capital accumulation; (2) a cumulative rise of from one to three per cent per annum in the national income; (3) a low income-elasticity of demand for agricultural products; and (4) a relatively high rural birthrate. This means that a sizable net transfer of labor from the agricultural to the industrial sector must occur if the real earnings of the human agent in the two sectors are to be equivalent at any given moment of time. Even if capital accumulation, labor saving technology, and birth rates were identical in the two areas, the low income elasticity of demand for primary products would, in and of itself, create the necessity for a sizeable marginal transfer of labor power to the urban sector if productivity of the human factor in both areas is to be equivalent. But the mechanism of reallocation does not operate instantaneously. Social and cultural barriers to farm-urban migration, even under conditions of full employment, are sufficiently intractable so that the marginal increment of transfer is not large enough to bring about equivalent earnings at any given cross section of time. Implications for economic efficiency are obvious-since total product is maximized when marginal products of comparable agents are equalized, net productivity differentials between farm and industry mean that the economy is not making optimum use of its scarce human and material resources. This poses a problem for social and economic policy to facilitate migration and to increase mobility of resources generally without undue sacrifice of other political and social freedoms.