The effects of agricultural productivity and locational shifts in production on economic growth and development

This dissertation focuses on agricultural productivity and locational shifts in production, and analyzes how they affect economic growth and development.; The major premise in development economics was that agricultural productivity played an essential role in economic development; its increase led to improve the welfare of rural people; loosen restrictions on the labor movement from the agricultural sector; and increase rural capital that can be used in other sectors.; To examine this conventional wisdom, the dissertation develops the endogenous economic growth models and analyzes them under three different economic environments; a closed, a small open, and a two-country economy (Models I, II and III).; Models I and II show that agricultural productivity always has a positive link with economic growth in a closed economy and a small open economy, while Model III shows that whether it has a positive or a negative link depends on parameter values in a two-country economy.; Matsuyama (1992) demonstrated that the relationship between agricultural productivity and economic growth was positive in a closed economy and negative in a small open economy. However, the dissertation demonstrates that under different economic conditions of international trade, it may be possible to have different results.; In a small open economy where the manufacturing sector is highly protected from foreign competition, agricultural productivity has a positive link. In a two-country economy where incomplete specialization is assumed, the link can be positive or negative, depending on parameters.; Model IV illustrates economic growth and welfare in relation to locational shifts in production. In the context of the Schumpterian framework, a temporary monopoly leads firms to shift production to low-income countries to exploit cheap labor and capture their market.; Model IV determines an equilibrium number of firms that shift production endogenously and evaluates welfare. People often fear that production shifts may decrease employment and deteriorate their economy. Model IV shows that this actually is not always true, to the contrary, production shifts may improve welfare.