kmnat of vclopment Economics t 5 ( 19 185-2 1I.

North-Holland

GROWTH
ECONOMY

Received November 1982, final version received ilpril 1983

A model is ~n~~ru~~ to examine the determination of income distribution in an

arian economy such as the tndian one, in which both rich capitalist farmers
enee farmers rent in land from landlords. It is used to analyse the grov~th and
income distributional consequences of different kinds of institutional and technological changes,
the possibilities of the growth of capita&m, and the impact of industrial expansion.

Theories of the determination of agricultural

rent usually assume either
that only capitalist farmers hire land from landlords and use hired labour for
production,l or that only small peasants hire land and produce with their
own labour. For analysing the determination of rent and ncome
distribution in Indian agriculture, ;he use of either of thess approaches seems
inappropriate: although there is a very large number of tenants in the lndi.an
agrarian economy who can be described as poor farmers, with the progress
of the Green Revolution in a situation in which the purchase and sale of
land is severely restricted by attitudes towards land and by legislation,
capitalist farmers have also entered the land market as tenants in a large
way? The crucial feature of the Indian agrarian economy seems to be the
coexistence of capitalist and peasant tenants.
*This paper is a shortened version of a chapter of the authors doctoral dissertation,
submitted to the Massachusetts Institute of Technology in 1982. Tile author thanks Richard
Taylor, and two an~n~~u~ refere:s of this journal for valuable comments and
t remains solely responsible for the remaining errors.
approach of the English ol.rssical economists. Thus Micardo { 1817) considered
capitalists, landlords, and -Yorkers -- with capitalists: paying rent to landlords.
netti (9960) and Casarosa (19 /8)for formal pre neations of the Ri=rdia growth
discussion of Ricardian and neo-Ricsrdian rent eory, see Rurz f 19W.
er have no role in the story, or are i ti-1 with the landlords. A large
~~~~ulture, includin Indian agriculture, has
dhan asair (19711) and Cheuag
owin

6304-3878,&4/$3. Q 1984, Elsevier Science Publishers B.V. (North-Holland)

186 AX. Dutt, Rent, income distribution end r:roNth

Xfhe purpose of this paper is to examine the impiications of this

coexistence of two types of terzants when both can re*qtin land on the same
market, something which has riot been adequately discussed in the literature
on underdeveloped agricu,lture.4 Thus in section .: we construct a simple
model of a purely agrarian economy in which twc kinds of cultivatars --
large capitalist farmers who own some lazed ant use hired labour for
c;u&ivation, and small subsistence cultivators who ha-V no land of their own
and who alternatively worlr for wages - rent in L;%ndfrom unproductive
landlords. The model examines how rent, income dstribution, and capital
accumulation are determined in such an economy.
The rest of the paper uses the model to anab-se several important
questions that have been raised in the development l&ature. In section 3 we
examine Myrdals (1968) analys s of the criss-cross) ng of class interests
regarding different kinds of socio-economic changes, w Gch militates against
the polarization of agents into two classes, preventing IIany kinds of changes
from u-c.urring. While the traditional analysis with tw 3 kinds of economic
agents precitlded any analysis of this question, the exis, ence of three classes
in our mode: allows us to examine how each of the three different classes will
view different kinds of +.~qges, depending on how tl eir incomes will be
affected. In section 4 we examine the prospects of capit rlist development in
agriculture. Economists with widely different ideologica backgrounds have
been concerned with several related aspects of this que: tion: how capitalist
agriculture will behave in relation to peasant agriculture, and which of two
groups -- capitalist farmers, or precapitaiist elem! ,nts like usurious
moneylenders and unproductive landlords - lwill domin ite in the economy
in the long run. A simple long-run extension of our model enables us to
consider these issues with the hope that tighter conclusiorus can emerge from
a formal, if specific, represen@L? C? 23 Tsrarian cccnomy. Finally, in
section 5 we extp?z! GM model of a purely agrarian economy to include a
fixed-price non-agricultural sector to answer ques ions relating to
a~~ri~ulture--industry interaction, specifically to analyse tl re implications on
a~~~i~ultura~sector growth of growth in non-agriculture.

e economy we are concerned with IS a purely i rafian cconosrqf

ood, foodgrains. lt hzs three distinct wpcs of econo
capitalists, and peasants - with each .>ne homoge~aeous

ic contributions far tht: case of two types af tenants. Sau i 1

ent in the text, and this s ~lraawsOR that work.
within its CUSS so that we can aggregate over them and consider the
behaviour t;f classes. Land is owned by landlords and capitalist farmers.
while labour is provided only by peasants? There is absolutely no purchase
or sale of land?
Landlords hold TI units of homo neous cultivabre land, fixed at a point
in time:. They are !~nrn~t~vat~d and lazy, so that they do not engage in
pr~u~~i~~ acti ity, renting out all of their land to peasants in quantity TP
and to capitalist farmers in quantity I;. When they rent out land to poor
pasants, they take a vantage of their plight, so as io squeeze them of their
eritire surplus production after their subsistence consumption requirement __
which may depend on socio-cuftural factors - has been met. Capitalist
farmers can rent in land from landlords at the same rent, our model being
applicable crnly to situations in which they do not demand all of the iand.
Since they can cor,ceivably pay an infinitesimally higher rent than that paid
by peasants, they can rent in whatever amount of land they want to, given
that they dGmand less than the total supply, and the remainder of the land
will be rented out to peasants who will not want to compete for the land by
paying a higher rent since thev will be indifferent between renting in more or
less land (their consumption -staying at subsistence in any case). Landlord
income is given by

where cis rent per unit of !and. and where

Turning next to peasants, we assume that each one of them supplies a unit
of tabour. The number of peasants, given at L at a pdint in time, is large
enough to result in surplus labour in the economy. Peasants can either work
on the plot of land they rent in from landlords, or r capitalists, for a wage.
Denoting the numbers of such peasants by L, and L,, respectively, we have

L== L,-l-L,.

1
3easants use land ;lrad labour to produce foodgrains witn a Lcontlel
reduction function, but they cannot afford any pro uctive capital. Sinkx

Rhvmg peasants to hold some land would call for only minor changes in our analysis
Cupitailists are assumed not to work. except, perhaps, in a supervisory oapacit!.
Vyas (1970) and Sau ( 198 1) f&v some ~~~ti~~~t~~~~of t in the IndiIn

Kent will then be determined by scara~y rather t

~~~~~~~~~~~
~~~~~~~~)~~
D.2WlS the rekltove absencx of substiiuti~~n
possibilities between land and labour. St=e Vaidyunathan (1934). The assumption. 50th for
peasant und *or capitalist farms (see below) is an assumption of convenience and our results
wckuld follow IIwz ,ittoKed for limited substitutability.
188 AK. Dtctt, Rent, kmme! distributiclti and s~raruih

labour is in abundant sexpply,the level of peasant output is give1L by

Q*==a,q, (4)

wkg2re a, is the output-land ratio on peasant farms, If b, is L

r of units of labour required to produce one unit of
the assumption af surplus 1 ur implies that L,
that the subsistence consumption of asants in terms of fa
good they wnsume, is given at level C, the rent (in terms
products) per unit of land that grc=aFtants
pay is given by

r = cl*- C(L@/T*)* (5)

Provided that capitalist farmers do not demand more labcur than is

available, which the assumption of surplus labour guarantees, they can hire
l&our i-n any quantity that they want to at a wage infinitesirrally higher
than c* WP &all uipuu
Glsxnlfnd
. . v U&&+411 11wpa*
11 e ++ *a i?ir the same at a wage W,equal to c,
LIGy tan
so thaP

w = C. (6)

L, is determined by the capitalist farmers demand, and L, is deter nined as a

residual from (3) with all the peasants not getting employment outside
staying back on the peasant plot.
Finally, capitalist farmers can use a technology which uses capNital,land,
and labour, once again in fixed proportions, reflecting the absence of
substitution possibilities bet.ween the three inputs. The stock of c tpital, K,,
is given at a point in time as a result of past investment (where investment
goods can be bought at a fixed price from outside the agricultural sector,
ch we d-3 nJ>tconsider expkieitly for now). Assuming, as done above, that
ey ca~ hire all the land and labour tha:: they want, their output is given by

Qc = Ws, (7)

W-capital ratio in capitalist agricultt re. The de~~and for

hour (and hence their actual emp!oyment tan ~~~~t~lis
re tl~~refore given by

=Lc ignores the fact thal w mug, rise in the v 3-y sRort run 1-8response
2x3irKTea%in the demand for iabour On Ci%pitalistfmns, and our assumptionC~Bn~~n~~~t~~
ts USinst~ta~~o~ adjustment. With surplus labour, of course, the w 1~ will never ~&cl:in the
 .K. Dtltt, Rena, income di~~rib~tt~~ and growth 189

where u, and b, are the output- and and labour-output ratios on caoitahst
fmm Capitalists can own som land, the quantity of which we denote by
that the amount they use is given by

where Y&is the amount they rent in from landlords. Their income is therefore
given by

t is now a simple matter to solve for the values of the variables wt arc:
interested in, in telms of the parameters of the model. Using (Z), (5), anti (7~
through (10)we can solve for r, the crucial variable of our model to get

The income of landlords and capitalist farmers follows by substituting (12) in

( 1) and (1 l), using (6), to get

1
c(L- b,kK,)
T,, and (13
L TI + To-k&/a,

yC=(l -cb,)kK,- up- L- bCkKa I(kKJa, - T0) (14)

Tl + To- kK,cr, j
l

For peasants, the relecrant variable to consider is per capita income, which is
3ven as
yp = C. (5)

The final variably 01interest to USis total ~~~ricu~tura~output,

ode1 solution with capitalist far~~ers re

190 AK Dutt, Rmt, income
distribution and growth

CCL- b,kK,)
cb,+ a,- - (l/a&~ 1. (174
[ TI + T* - kK&-l, 1

Conditio;ls (Ua) and. (17b) ensure that both peasants and car italists rent
some land; (17~) ensures that peasants produce above their subsistence
requirements, that is, rent is positive; (17d) ensures the existenct of surplus
labour, that is, the available supply of labour exceeds the tech nologically
required amount for production; and (17e) guarantees that the return to
capitalist farming is higher than the rent obtainable by renting oirt the land
instead, a condition that must be fulfilled for the viability of capitalsst farming.
it is easy to check that these conditions also imply that L,>O and Yc~0.
To consider the dynamic behaviour of the system we assume that capitalist
investment is given by

dK$dl:= I, =.~(p -&&,, g > 0, (W

where r denotes time and where

is the rate of profit in agriculture with pn being the given price of tP:e capital
geod in terms of food which we shall subsequently set equal to unit) without
loss of genertility, and where p. denotes the rate of profit on alternative
avenues of investment open to capitalist farmers, examples bei usury,
trade, and transportation.12 It follows from eq. (7) that the grow rate of
pitalist agriculture, the only growing sector in agriculture, is determined by
rate of profit in capitalist agriculture, which implies that the higher the
capitalist income, the higher the rate of agricultural growth.
ft is obvious, however, that if this were all there was to growth in this
odel, we could tell only a partial story, for, with capital being ac:cumuiated,
the stock of land would soon in exhausted and the rcstrktions on tlalc
parameters assumed above wcsuld no longer be satisfied: with land
asants being completely tr nsformed iklto
cease to operate. To bail it out we can
il-,,1Stcbc
cuncern ourselves with the immediate future without going into the very long
run con*~quen~s of growth. It is the second option that we shal follow
here. 3

the 4Exts of parametric shifts we are primarily interested in

the effects on the incomes of different classes and on growth, of changes in
the different institutional and technological parameters of the model. The
effects on the incomes of rliflerent classes sheds light on !h~ issue of the criss-
crossing of class interests analyzed by Myrdal (1968).

A rise in c cdn be thought of as being forced by the government or by

swial appxment. From ( i 2) we get

(19)

which is negative: higher consumption implies that peasants will have a

smaller surplus which can lx mopped up as rent by landlords, implying a
lower rent. It follows immediately that landlord income falls when c rises.
Total agricultural output will not change. In regard to the income of
capitalist farmers, YC,and hence the rate of growth of (capitalist) agriculture,
the effect is not clear: the increase in c on the one hand Increases wage costs,
and on the other hand, rent costs a.re reduced. It can be checked that the
condition for dY,/dc >Q can be writte 1 as

where t, = I( To+ T,), the ratio of rented land to total land operated by
capitalist farmers. The condition requires that the actual labour-land rafio
on peasant farms be higher than on capitalist farms, and lr is large. Tile
ment Surveys conducted in the mid-fifties in India and the
e which has grown up itround them have shown th;rt Ix~:c
se less Iabour per unit of land than small farms. Idcntif$~g
smail fwms with peasant and large farms with ~a~it~li~~ farms, and rlating

The first is followed in section 4, however.

192 AX. D)utt, Rent, incxmaedistribution and growth

the large extent of renting in of land by capitalist farms in India, it seems

that for many parts of India, the inequality conditions may be satisfied. So it
is possible that improving peasant income may be associated with increasing
the incomes of capitalist farmers at the expense landlord incomes,*s and also
*Gth increasing the growth rate of agriculture: growth and equity seem to go
hand in hand.

A rise in II,, the productivity of land in peasant agriculture, raises peasant

output, but landlords exact the entire increase in the form of rent, so that
peasant income is unchanged and rent, and hence landlord income, increases.
That implies a fall in capitalist income, so that the agricultural growth rate
falk Mugh current output rises. These results vividly illustrate the point that
purely technological changes in agriculture designed to help the poor may
not achieve their purpose, and may in fact aggravate the situation.
A fall in b,, the technologically required amount of labour per unit of
output in peasant agrkulture, does not effect any of the variables at an
instant in time. However, since this change implies that total iabour
requirements are reduce& i!le amount cf labour in surplus, that is, the
difFerence between the two sides of (lad), increases. Since it is the fact that
labour is it\ surplus which rt:tlic- peasant consumption to the subsistence
level, this change actualb aggravates the plight of the peasants without
having any immediate impact.
A rise in a,, the productivity of land on capitalist farms, reduces capitalist
demand for land and allows peasants to rent in more land to produce more
and increase their surplus over subsistence requirements, which is promptly
mopped up by landlords in the form of higher rents. While peasant
consumption does not change, landlord incoine rises. While I,, ri; adversely
affected by the rise in rent, since capitalists now rent in less land to produce
the same output, there is also a positive effect. Differentiating (14) with
respect to a, we get

almost non-existent, TJT, would be close to unity,

ckets would be ~~rnost ~q~~~ to I^, SO that
necessarily positive. However, given a large peasant sector.
make this expression negative, so that
 .K. Dutt. Rent. income ~i.~t~i~~ti~nand growth 193

A rise in h,, or a rise in the produ~t~v~ty of labour in capitalist agriculture,

will redtic;e the rent since the demand for labour by capitalist farmers will fall
and an increase in the numuer of peasants on rented land will increase
peasant consumptiou out of their constant output, thereby reducing their
$u~lu~~ and he the rent. Landlord income will fall, capitalist income will
lower rent and lower w costs), and peasant income
un~~ect~d. Total output will be unch ed, but the growth rate will
y which labour is in surpius, moreover,

Finally, 8 rise tivity of capital in capitxlist agriculture, will

have an ambiguous effect on rent. By increasing capitalist output pnd the
employment of labour on capitalist farms, ia reduces the num
left on self-cultivated land without reduci:lg output, so that
mop up a lar er surplus from t em in the form of rent. But by also
jn~re~sing the use of land by capitalists, it reduces the amount of Land self-
cultivated by peasants, hence thenr output, and hence their surplus over
subsistence consumption, thereby tending to reduce the rent. Differentiating
(12) with respect to k, we get

It is shown in the appendix that LH,~, z&&, is a sufficient condition for

L >a&,.( T1+ TO),though not necessary for it. It follows that if that condition
is satisfied, then r falls with a rise in k.
The condition compares the technologically required amounts of labox
per unit of land under the two types of agriculture. While the use of capital
in capitalist farms can be expected to have raised the productivity of both
land and labour, so that CI,x+, and b, <b,, the question is whether the use
of capital has resulted in a greater saving of land or of labour. pi fair amount
of evidence has act:u ulated from various parts of India on this issue. There
halve been several studies -- ing Bartschs ( 1972) work or the whole of
India using hypol hetieal models, l6 Raos (1975) study of the effects of
tractorization in the Ferozepur district of Punjab, Sarkar and Prahladachars
) study of the effects of tractorization in the Dharwar dis:rict of
ataka, to name just a few -- suggesting that the use of capital in the
Ml in the ~~~~ujr~~amount of labour per
videnr;c: is not hard ;o Cod: Lockwoods
194 AK. Dutt, Rent, inmme distribution and growth

labour requirements. Finally, Sen ( 193X), looking at the eflects of trac-

torization in Punjab, concludes that tractors seem to have allowed higher out-
put without requiring more labour. While the evidence therefore is not al-
ways in the same direction, it seems fair to conclude that capitalist farming,
at least when interpreted as using an advanced mechanized technQlQ
nor resulted in a rise in labour requirements, so that a&, &+,h, seem
to be satisfied,
We may therefore expect r to fall with a rise in k. YI will fAl, and it can
shown thit Y,, and hence the growth rate of agriculture tvill rise. With
&t,> L+,,there is also a rise in Qa.

A rise in t, the total number of peasants, either due to a natural increase

in population, or due to migration, will increase the total peasant
consumptiea out of their product, reduce the surplus that land!ords can
extract, and therefore reduce rent. Peasant income will remain unchanged, YI
will fall, ;lnd YCand hence the rate of growth will rise, while current output
will not change. The extent of surplus labour is increased, implying a long
run deterioration of the position or the peasants.
The effects of a rise in K,, the stock of capital, due to its accumulation by
eapi Mist farmer5 , are similar to those of a rise in k. Thus, with a,b, &zcbc, it
will leave peasant income unchanged, reduce rent and hence landlord
income, increase capitalist income, and raise current output. The rate of
growth may either rise or fall, depending on the direction of change in the
rate of profit _17
Regarding land, one could examine the effects of a redistribution of land
from landlor Is to capitalists keeping the total stock of land constant, or of a
rise nn the tol:al amount of land. The first kind of change would leave peasant
income, rent, and total output unchanged, capitalist income would rsse at the
expense of lz:!dlord income, and the growth rate would rise. The second kind
for example, increasing T,, either through new land being brou
cr cultivation or through in asing the intensity of cropping, wo
e amount of land hir by peasants, increasct: their output and
s over consumption, and hence allow landlords to raise the rent,
tly ~ed~~~jngcapitalist income rarjd the gl-owth sate.

ent parametric shifts aTect the inc

ts understand how
ss w vie c
 First, one idea which our analysis clearly illustrates is the c&-crossing of
class interests which prevents the polarization of the htn~~tis ~~XWI~C in
rarian economies into two distinct anO opposed classes. For e:camplc, we
d that ca~i~a~~stsmay side with either peasants or landiords on the issue of
basalt ~~nsum~ti~n; landlords and capitalists can be divided on the
issue of te~~n~l~ RSS involving a rise in the productivity of !land in
, a nse in the productivity of labour in capitalist
a rise in the productivity of capital on capitdist farms; but
quite ~ssi~l~ k united on the issue of increasing the productivity of land on
capitalist farms.
Second, our model illustrates that diRere t types of tc:chnological changes
may have very JiffeTent impiiications for the fortunes of different classes, and
this fact can contribute to our understanding of the nature ;If technological
ress in underd~velo~d agr~ultu *e. The factor saving biis of a specific
1 lackagc causing technological c hangc may not be known ao the difkrcnt
qents. Further, the effects of some types of technological changes. even if
their exact effects on the production function are known, depend on the
IaIues of certain parameters 0 the model, which may be unknown tn
prospective adopters of the new technology. Given all ti;e$e uncertainties
iegarding the effizcts of a given package of technological chaqge. our results
wouId explain the disinterest shown by possible adopters of ~ucfi changes in
implementing them, thereby explaining agricultural stagnation. It follows that
it is not just landlords who would block technological ch;lng<s as in Bhaduri
( 1973); capitalists could also want tcl do it, as in the case cf changes
increasing the productivity of Ignrl in peasant farms (though by doing SC theq
would be doing Ihe economy a service).
Third, our resuks show that apart from a rise in the level of subsistence
consumption, none of the other changes will have any effect on peasant
su.put at 3 point in time. This has two imphcations. First, peasants are likeij
to view almost any kind of changes with disinterest, as nothing woui+ <em
to improve their immediate condition. It would therefore be diffkult to
mobi$-v+ tx peasantry and make them demand changes which woo.ld Et in
th&r interests in the ion er rl:n by reducing the extent of surplus ;tbour in
the cc,onomy. Second, th fu~~dame~t~i conflict in qrarlan ecm0r kits of t/x
typ: ~~~~si~~re~ in this p;qxx seems 10 be betw~n capitalists ~lcl ~MKHOH~~S.
M/c shill1 consider the nature of thts contlict in EIOW
Cecfion.

To examine 161

since these two parameters measure Le inl~o~~~~~~~~

of the two chses ---
1% AK Rwtt, Rent*rncomedistsfbution md powth

landlcrrds and eapitahsts - so that we can examine the nature and outcome
of thle conflict between these two classes by examining the long-run
tendencies of these parameters.

We assume, as before, that K, motes in the long run amardin

equation

in which the growth of the stock of capital depends on the excess of the rate
of profit in capital&t agriculture over the rate of return on alternative
aversues of investment, Negative changes in K, c;an be interlpre
depreciation of agricultural machinery.
Regarding 7i we asswne

where rO is the minimum rent at which landlords will want to increase the
amount of cultivated land they rent out, reflecting alternative possibilities, or
just the socio-fxonomic characteristics of landlords; note that it is not
dimensionally the s;zqe as po. The equation implies that the change in the
amount of cultivated land owned by landlords depends on the rent they
earn. A rise in 7i +zanbe interpreted either as an increase in the amount of
actual cultivable land of landlords due to land clearing, or as an increase in
the effective amount of land brought about by increasing the intensity of
iand use by extension of irrigation; a fall can be interpreted as letting
cultivated land he fallow and fall!into disuse, due to rent being too low. Tne
costs ~&olved in bringing land under cultivation are being ignored for
simpkity.
The last equation raises some empirical and logical questions. There is
the empirical question regarding whether there is fallow land in Indian
agriculture which may possibly be brought under cultivation. The sources of
th literature on Indian agriculture suggest that the extension of area
under cultivation has contributed substantially to agricultural growth ri
down to the seventies, though the importance of this factor vis-ii-vis
growth of productivity has diminished through time, the additions to
cultivated land coming mainly from land previously classified as barren and
ur,cultivated land and %ultivable waste, though some have come from a net
u~tion in fallow land and from grazing iand, I0 For the future, Desais
 A.K. litit, Rmt, inamc distribution and growth 197

predictions su st that the increase in area under cultivc,tion will be a major

contributor to growth. l9 Further, given the fact that thG intensity of cropping
in India IS l.lS, no less than 280 million acres of land remains unutilized for
six months a year and couljS be brought under cultivation to increase the
effective anaiount o,f land w&h c use of the appropriate amount of
in Indian agriculture, oh
nt of land under tivation. We can surmise
of the landlords 2nd not with peasants
ce as much as they can, though for
reasons. Second, there logical question as to why landlords
can have land fallow or less than fully utilized. The answer may partly lie in
the pre-capitalist attitudes of rich landlords who are not optimizers and can
be satisfied with whatever they earn; higher rents, however, gnaw into these
irrational attitudes and induce them to bring more land on the market. A
conventional answer could be in terms of the costs of, and returns t6
ng in more land under cultivation.

4.2. Mownent of the economy

To examine how the economy moves through time obeying eqs. (21) and
(22) we next derive a phase diagram in K, T space, as shown in figs. 1 and 2.
The TT curve in the figures show values of K, and Tl for which dT,/dt =O.
The curve is upward-rising since a rise in K, increases land hiring by
capitalists, reduces the amount of land hired by peasants, and reduces rent if
the factor intensity condition is satisfied, so that dT/dz will fall; TI will
therefore have to rise to raise the rent (as argued in the previous section) to
dt to its initial value (of zero on the curve). As reflected by the
arrows., at points above the curve Tl rises, and at points below, it
falls. The KK curve, showing combinations of 7,,and K, for which dKJdt=
0, can be either rising or falling, and the two figures show the two possible
cases. A rise in TI implies an increase in the amount of land hired by
her rents, lower profit rates for capitalists, and hence lower rates
of investments The effect of K, on the rate of investment cannot be signed
definitely, explaining why KK may be either upward-rising or downwar&
. Whether KIT rises c)r falls, however, K, falls in the region above the
curve and rises below it, as shown by the direction of the arrows in the

Ni@iqp Use and Foodgrain Pmduction, India, 1973-74, 1978-79, and

t of Agricultural Economics Occtz
and Image ~ist~~~ti~~ Prcjxt,
20%tzSau (1978).

Institute (1979).
 Ka
Fig. 1. Long-run dynamics with falling KK.

Fig. 2. Long-run Dynamics with rising KK.

t is proved in the appendix that KK is necessarily flatter than FT: Given

t of intersection of the two curves (assuming that it

economy will move. Three comments can be made from the

given that we have a
 AK. Lhbt, Rent, income distribution an.4 growth 199

economy ks initially. Third, one cannot say, by lookin at the direction of

in the two parameters for some length of time, how they will move

We have just seenthat the model admits of two kinds of long-rrtn

in which I&rises at the expense of K,, and one in which the
. In the first ea the economy initially starts from above SS
(the region we shall hen~forth call the region of capital st decline), and
eventually there is a rise; in the amount of land landlords bring under
cultivation, while the capi 1 stock in capitalist farms falls absolutely,
implying that land is bein transferred under peasant cultivation, until
ultimately capitalist farming disappears altogether. This is the case of the
deeline of capitalism in agriculture: peasant agriculture increasingly
predominates with landlords exploiting peasants to deprive them of their
entire surplus production after subsistence. in the second case, when we start
from below Ss, that is, from the region of capitalist triumB2h, , landlords
eventually allow more and more of their land to fall into disuse while
capitalists cultivate increasing amount of land - renting more land from
landlords while peasants are driven off the land and pushed on the labour
market: this is the case of the capitalist development of agriculture.
Despite the fact that our model analyses some long-run tendencies, it is nlDta
complete model of long-run development, and this for two maia reasons. First,
the movement of this economy along any dynamic path cannot proceed
foreover in the manner analyzed. For example, if the economy starts in the region
of capitalist triumph, there will eventually be continuous rises in K, and
falls in T,, so that, uitimately, peasant agriculture would be completely
displaced, and rent would no longer be determined in the manner described
by our model. The model merely shows dynamic tendencies within a given
system of relations of production, it does not analyse how these relations are
transformed, or what happens after the transformation takes plal:e.22 Second,
the number of peasants has been taken to be given at the level L in the
dynamic model, which means that we have abstracted from population
growth. If we allow L to rise, for a given & and K,, I- must fall, so that
t must fall, implyin that the TTcurvt: must shift up to a position like
in fig. 3; similarly, the rise in L increases p the KK curve must shift
up to ii position such as KK, whether or not it is upward sloping. The
result is thal the saMepoint moves above to a oint hke P, with the
separntrix moving upwards as well. If we now assum that population grows
at an exogenously given rate, the two curves must gradually move upwards,
the economy beiel e chances of
capitalist triumpE, dat ion

221t is likely that even before peasant agriculture is annihilated, with hdiords leaving mOX
and more of their Iann idle,there will be pressuresby capitalistsfor buyingup land of the
the
landlords; this has bee31ignored in our anpAysiswhich assumes away the sale of land.
 1
Qr Ka
Fig,. 3. Long-run effects of a rise in population.

rowth, although the other outcome is possible if the rate of population

is not too high. In what follows, both of these complications will be
, for simplkity.

mparative dynamics properties of the model by

e pha.se diagram is affected when the parameters of the
 AK. L&M,Rent, income distribution and growth 201

could have been moved from a path implying (eventually) capitaPist growth,
to a path implying the decline of capitalism. The growth of capi~talism in
industry, reflected by a rise in industrial output and causing migration out of
agriculturq leads to a capitalist decline in agriculture, a result seeming to k
at variance with the Lenin-Kautsky laws of capitalist development in
~lfure.~ As another example, consider the effects of a rise in c. We
w that this will reduce r, but could increase or reduce p, at given K, and
nding on whether or not (20) is satis If it is satisfied, so that the
raises p, then both KK and TTwill down, though TT will still
shift up9 so that it is not clear whether the region of capitalist triumph will
expand or not. Hence it is still possible that a rise in c may imply an
improvement in the chances for capitalist triumph even rf it reduces p at a
point in time.
It is unnecessary to consider other parametric shifts, as our examples
t that given T1 and K,, any parametric shift increasing
(reducing) r will shift down (up) the TT curve and increasing (reducing) p
will shift up (dcwn) the KK curve. It follows immediately that any shift
which raises r and reduces p at a point in time will expand the region of
capitalist decline; and conversely, any shift which reduces r and increases p
will expand the region of capitalist triumph. In the case in which both rise or
both fall we cannot be certain; both outcomes are possiMe, depending on the
values of the parameters.

4.4. Cottzments on the growth of capitalism in agriculture

Our moCt;l can do little justice to the rich literature on the growth of
capitalism in agriculture which has been written from both historical and
strictly economic perspectives,24 since it addresses itself to a rather specific
type of ~~onomy,25 and uses some very simple assumptions for the sake of
analytical tractability. Indeed, the model can claim to be no more than an
example of the way in which agrarian classes interact. Nevertheless, one can
example is an important one and may capture some of the
salient features of the Indian a rarian structure. Here we comment on some

low. This result s Id b: taken with a grain of salt, since a proper analysis of the
question can only with a model which explicitly considers an industrial sector: the
analysis will be conducted in the next section.
See, for example, Lenin (1899a, b) and Kautsky f t 899). F or a discussion 011 India, see Sau
(1973,1938) and Patnaik (1971). Lenins ideas and their relevance to underdeveloped economies

,er scenarios are possible:

:r an e~~on~~ny ill which
plrb_lly ~~p~r~a~t for
ti~ns with the other
modes of production.
202 AK. Dutt, Rena, incmr distribution and growth

implications of the moJel regarding the gro vth of capitalism in agriculture,

relating them to some existing ideas in the literature.
One important implication of tlhe model, commented on above, is that
with our assumptions,, in the hmg run, one of the dominant agricultural
closes - capitalist farmers or precapitalist landlords - will triumph at the
expense of the other. We can compare this result with Bhaduris jt9!31)
analysis of the pattern1 of accumulation in an agrarian economy in which two
kinds of accumulatiorn occur - productive acc\lmuPatian having the result of
increasing agriculturai output directly, and typically conducted by a class of
rich and progressive farmers, and unprodiii:tive accumulation which simply
changes the distribution of output in favour of the investing &ss at a more
CJ icss constant (or even declining) level of output and is typically conducted
by a distinct class of unprogressive elements in rural areas, such as
rchants and moneylenders, whose relation with poor peasants is of a semi-
nature in the sense: of being forced and involuntary. Bhaduri examines
relation between these two classes to provide a classificatory discussion
of different kinds of dynamic relations: one of stnct complementarity with a
stable lung run equflibK:um with both classes floe\rishing side by side, one
with strict competitiveness yielding a relation of competitive extinction, and
et others of a partl,!,! complementary and partly competitive nature.
However, the analysis does not examine what kinds of relationships are more
likely in a given agrarian structure. Our model develops a specific theory ST
income distribution, and while this makes the analysis less general, it takes
its role beyond classificaflion to the concrete prediction that the interaction
the t wc cIasse5 - capitalist farmers and landlords, which can
be equated to Bhaduris two classes _- is one of competitive
While our model admittedly makes strong assumptions to obtain
it seems that similar results emerge from a wide class of modei
addressed to the relation between capitalist and precapitalist clas:;es,26 and
the result fits in well with Lenins (1899) idea that the peasant farm, as a
e of production, cannot coexist in the long run with the capitalist mode

redztion of eventual competitive extinction, the question arises

ether capitalism will develop in a particular economy, and on this
implications. First, given that &e dynamic paths in the
not necessarily monotonic, one can conclude that it is
behavisur of an economy in a given time span
in a~r~~~~t~~re will take eventually, and this goes welt
capitalist development in agricultut e follows
at determines whether or not a particu~~~r
economy described by our model will exprrience capital ist development
depenrds on which side of the se aratrix it is on, and this depends on ti-e
relative sizes of the regions of capitalist triumph and deckine, and on *%
initial values of K, and 7r. What tFe ibrmer suggests is that capitalist
development is more likely, ceteris paril~~~ if the economy has (for instance)
B higher level of peasant consumptiIB;l. a higher population, a higher
productivity of labour in capitalist farm:,, and a lower land productivity on
peasant farms (which also suggests what inds of changes in the economy
make capitalist development more likely), and what the latter suggests is that
with two economies with identical structure. capitalism is more like!y to
develop in the economy in which capitalists are already more important.

5. Intersectoral compticatims

We have argued above th;lt the expansion in employment outside

agriculture, leading to migration from tLat sector, may actually create
problems for capitalist development in agriculture, a result which seems to be
at variance with the suggestion that the capitalist growth of the industrial
sector causes capitalist growth tn agriculture. One could argue, however, that
our model did not provide a suitable basis for discussing that question, since
it assumed out of existence the major mechanism by wjhich industrial growth
is supposed to promote capitalist development in agriculture __ by increasing
the demand for food, thereby raising ;he relative price of food and making
farming more profitab 1: for capitalists. We now consider a modificatios of
our midel which takes into account intercectoral price movements explicitly,
to examine the question of the effects of industrial growth on the capitalist
development of agriculture more carefully.
The agricultural sector of the model is identical to the economy depicted
in the previo:rs model, except that now peasants conz.rme both agricultural
and non-agricuBura1 goods, so that subsistence is now defined as a bundle
with C, of the agricultural good and L*,cdf the non-agricultural good. The
subsistence level of money income is then gillen by II,C,+P~c,, where pi
denotes price and subsi:ripts a and n from now on relate tc:, tht: agricultural
and navqgkwltural sectors arid !:oods. Given this, the cquatiws
represent in the tigricultural sector ilrt* C h_m bv_ (4), (7) { ior. { 11. ( PI. md
9), whlc (5), (6) and ( 11) art replace<1 by
204

where r9 We,and the income variables itre rrow expressed in money terms.
The non-agricultural sector is assumed to produce a sin le product which
either be con~m&d ora invested ixfleither the 48ricultur4U or the non-
a~~~~ltural -retort #beingthe jcapital *~good in both s Production in t
tar requires labour and capital sin fixed proportions, ~o~~ti~~-li~~~T
structure of the market is oligopolistie: producers set prices as a rn~r~~~ over
prime c(Dstsand operate with an excess Gapacity of capitaLz9 The money
iw fixed in this sector at a level wn which is higher than We for
possible levels of pa9so that the aGtua1employment of labour in the sector is
always Idetermined by the demand for it, labour being in perfectly elastic
supply from the agricultural sector. Investment in the non-agricultural sector
is taken to be given exogenously for simplicity. We have, therefore,

L, = w, Dn =
1
W,b,(1 -I--?), (23),(24)

here z is the given markup rate in the non-agricultural sector and

variables and parameters have the same meaning as they had
cultural sector.
The total supply of labour must be employed (there being no open
employment in the economy) so that we have

L=L,+L,+L,. 12%
e assume that worklers above subsistence (that is, non-agricultural
kers alnly) spend a fraction a of their income above subsisten
cultural good, and the rest on the non-agricultural good, there
saving by workers. The other agents in the economy do not consume the
agricultural product. We assume constant average propensities to save, sl, s,,
and sn out of income from rent, profit on capitalist farms, and non-
ricultural Iprofits.Thus we ha,ve

nc,- --s,)Y, -+-(I-s,)~+(l--s,)w,b,Q,+p,c,(

 205

oods be equa1, that is

variesto clear the flexible-pri

non-a
n by

are positive constants denoting speeds of a ustment ira the

two ~~r~~ts, and show that the two equilibriating variables respond to the
vafue of excess demand in each market.
to the saving propensities, it is likey that with capitalist farmers
interested in accumulation, s, > sI. For accumulation, capitalist farmers buy
capital goods from the non-agricultural sector, and their marginal propensity
to accumulate is given by g. s,--g therefore shows the leakage from the
demand for non-agricultural goods from agricultural profit income while s1
gives the similar leakage from rent income. The relative sizes of these two
leakages determine the effect on agricultural demand of income distributional
s between rent and agricultural profit. With no presumption in either
n, we can greatly simplify aigebra by assuming s, -g = :+ = s;
relatively small differences in either direction from this equality will leave OUT
broad conclusions unchanged. Given this assumption, it can be shown, is as
done in the appendix, that equilibrium in the economy is locally sfzh!e.
We now examine the effects of an expansion of the non-agriculturrl sector
which may be represented by an autonomous rise in I,. Totally
the equilibrium conditions with respect to I, we can show that

re
206 AX. Dutt, Rent, immne distribution and growth

workers in agriculture, from whose ranks the new industrial workers are
drawn. Also,

which shows that the rise in 1, raises rent in agriculture both because the
price of agricultural goods rises and because an increase in rion-agricultural
output and employment implies that less peasants are left on peasant farms
so that the peasants have a lower total subsistence requirement, allowing
ta;ndlords to mop up a larger surplus as rent. It immediately follows that
landlord income rises. Also, we can show that

where d = w, - pat, - p,,c, is the industry-agriculture money wage difTerentia1.

The first ~t:rm within the outer brackets is positive, and as the next positive
term is subtracted from it, it is not possible to sign the derivative definitely.
However, one may speculate as to what its sign is likely to be in the Indian
context. The magnitude of the first ,erm depends on a, the marginal
propensity of workers in non-agriculture to spend on food, and on d. a,
reflecting Engel efI& ts, is unlikely to be high; indeed, Ray (1980) estimates
that Ihe urban expenditure elasticity of food in India is 0.340. d is likely to be
small, espetially if we adjust for cost of living difTerences in the two sectors,
given the povertT/ of both urban and rural working classes, Chatterjee and
Bhattachiarya (1674) .show that per capita expenditures for the lower income
groups -- which is relevant for our purposes - .bre merely 15 percent higher
in urban than in rural areas. Consequently, especially if T,/T, is high, one
would expr:ct the second term tlo dominate, so that dYJdl, would be
n of the non-agricultural sector will1indeed raise the
t if this rise is riot very larg: -- and that
oo large and the marginal propensity to
od is not very high - the increase in rent will swamp the effect
d capitalis income will fall. l[n that case, the rate of
riculture will fall.
s need to be made a,bout this result. First, capitalist
not ~~~~i~nt fo ricultural
eccr Y
carefully before making a blanket statement on t,k issue, for a particular
economy. Second, if our analysis were vzhct for a particular economy, time
series data on tht: agricultural terms of trade and the FAC of agricultural
growth could reveal an inverse relationship.o This result is relevant for the
discussion on agricultural price policy concerning the effect or changes in
agricultural price on agricultural production and the markete&J surplus. Our
result is a warning to those who beiieve that someho u raising agricultural
prices would trigger off faster growth in ;rgr+uiture :)y raising the rate of

6. Csudusion

In this paper we have constructed a simple model of rent determination in

an agr;:rian economy in a situation in which both poor peasants and rich
capiLlist farmers rent in land in the same market. Rent is determined in OUJ-
model with landlords charging a rent high enough to squeeze the entire
surplus production above subsistence needs from the peasants: capitalist
farmer.<, renting land in the same market, pay the same rent? The
implications of this kind of rent determination have been explored in the
paper-
First, the model shows the growth and income distributional impacts of
different kinds of exogenous changes in the agrarian economy. The analysis e
illustrates Myrdals analysis of the criss-crossing of class interlsts, suggests
explanations for a low rate of technological chiange. and shows that the main
source of conflict in Lgrarian economies which can be described by th * model
is that between capitalist farmers and precapitalist elements.
Second, the model sheds some light on the question of the development of
capitalism in underdeveloped agrarian areas, and shows under what
conditions the triumph of capitalism is more hkely. It should be pointed out,
however, that the model developed is a model which focuses onlve on some
important aspects of agrarian structures while ignoring many other
important issues. In particular, it stresses the relation between capiaalisr
farms and precapitAist hmdlords through the land market, but ignores
enti;*ely r:l;al credit rrmkcts, and hence dcxs not consider the rclations+ip
between capitalist farmers and precapit list moneylenders, a relationship
which may also be relevant to the question of capitalist development in
agriculture.
Finally, the model, extended to inelu also a capital& non-agkultural
tar, shows that the expansian of the nan~ag~~icultural sector may not
ways foster apitalist developmenl: in agriculture f~l~uwi~g the Lenin---
Kautsky laws of capitalist growth<in agriculture? It also implies that a shi
in the interseet~ral terms of trade towards agricultilrre may not imply growth
in that sector. These two results illustrate the by now well understood fact
that in underdeveloped areas with large agricultual sectors it is bad policy
to foster the growth of the industrial sector Aone snd expect the agricultural
sector ta follow obediently behind,

The purpose of this appendix is to prove three propositions stated in the

text.

A.I. If a,b,~a,b, then Lx,b,(T, + T&#

P~Qo~: If a& 5 u,&, then tz,a,(T,,T) + b,a,( 1*,/T)4 acbc, where T = q + Tp.
From (17d), using (2), (4), (7)$(8), and (1Q) and dividing both sides by T we
et L/T > acb,( TJT) t-a,b,( T,/T). Using the last two inequalities we get
L/T > acb,. Since T= Tl + T, it follows that E> acbc(Tl + To). QED.

e~~a~~.
With ~i,b,,>apbp, but with the difference not very krge, it is still
possible that Lr G,B,(TI -t-To) if L is much larger than the right-hand side of
(176).

A.2. Curve KK is flatter than curve TT that is,

g (22) with respect to K, and using (12) we

 AK. Dutt, Rmt, income distribution and growth

Also, differentiating (22) with respect to T we get

Hem33the slope of TT is

d T,/dk, = U?Gk--(T, -+-T,vd

TT a,(t-- b&K,)

which is positive given our assumptions and acb, 2 apt+,.

Also, differentiating (21) with respect to TI and I:,, respecti~eiy, we get

da c( L- b,kK,)
- = -g'(kja, - To/K,)-
aT, ( Tl + To- kKJa,)Z

which is negative, and

-
%F= g (k/a, - TofK,)ckJa,
L-aA(T,+T,)
wi (Tl + To - kKdtQ2

which cannot be signed defmtely, so that the slop of AK is given by

W/~C -b&G,+
=----- To)]
d T,/dK,
KK a,( L- b,kK,)

-- ra, - c( L- b,kK,)/( T, t To -
--
(k~/a

ns for the two slo

210 A.M. D:i.*t,Runt, income distributionand ,;lrowth

- {a,T, -I-k,#, + m&,Q, - c,L} WQ, - put, -- pnq,)h,

(a-s)q&Q,,+(f --4(Qp+Q,-tc&)

-Ek-- W -+-4wft - P&a - P&,)1-+vv&+PnCnb)

h

Fw local stabihty, sufficient conditions are that the trace of the Jacobim is
negative and the determinaut is positive. [See, for instance, Hirsch an
( 1974.1 The trace of the Jacobian is given by

tr= - jQ, + Qc + ac,b,Q, -c,L+ [SJW, +(w, -paca -pnc,)a]

which is seen to be negative, and the determinant is given by

+ 6 + w)aca~nbnQn}~

which is positive, proving stability.

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