The role of agriculture in economic development: Visible and invisible surplus transfers

Abstract

The financial surplus of agriculture has been central to theories of the role of agriculture in economic development. Morrisson and Thorbecke (MT) have used a constant-price social accounting matrix (SAM) framework to measure rigorously the financial surplus of agriculture and decompose the mechanisms of surplus extraction. History and theory have, however, stressed the role of prices as an invisible transfer mechanism in addition to the visible transfers identified in the SAM framework. We extend the MT approach by defining and measuring the real surplus of agriculture and decomposing the mechanisms of surplus extraction between visible and invisible financial transfers. Using an archetype computable general equilibrium model for poor African nations, we trace the generation, transfer, and use of an agricultural surplus created by a productivity gain in agriculture. This shows that prices indeed play an overwhelmingly important role in transferring a surplus from agriculture to the benefit of the rest of the economy.

Potential impacts of a green revolution in Africa—the case of Ghana

“…We quantitatively assess the contribution of agricultural growth to the rest of economy by measuring visible and invisible monetary transfers from agriculture to the non-agricultural economy following a methodology developed by Winters et al (1998).…”

“…Thus, it is necessary to understand the benefit of a green revolution measured in monetary terms. Here we apply a method developed by Winters et al (1998) to quantitatively measure such monetary benefits that account for both visible and invisible transfers of agriculture to the non-agricultural economy. This definition is based on the insights of development economists in 1950s and 1960s who characterised the dynamics of the economic development process as a dual system (Lewis, 1954;Fei and Ranis, 1961;Jorgenson, 1961).…”

Relevance of Declining Agriculture in Economic Development of South Asian Countries: An Empirical Analysis

“…De Janvry and Sadoulet (2009) believe that the benefits from a global orientation of the agricultural sector can be pro-poor where the production and post-harvest activities continue to be labour intensive. Winters et al, (1998) argued that industrialization can be successful when solution to the problems associated with the generation, transfer and use of agricultural resources surplus has been identified.…”

World Poverty and the Role of Agricultural Technology: Direct and Indirect Effects

“…Hence, once an economy is open and goods are internationally traded with low transactions costs, technological change in high value crops may produce larger indirect effects than technological change in the production of staple foods that can be acquired cheaply on the international market. What matters, in this case, is to carefully identify the role of agriculture as a source of aggregate income growth (Winters, de Janvry, Sadoulet, and Stamoulis, 1998) and how aggregate income growth translates into poverty reduction by mechanisms that will generally be other than through the price of food.…”