(2013.06.

10)

Lewis 2 Sector model

Agriculture - low value added Industrial sector - higher productivity and wealth generation Incentives to encourage workers to migrate from rural economy to urban Rural workers have very low if not zero marginal productivity Wage premiums in urban industry 30% above rural wages would encourage migration from rural to urban whilst still allowing profits to be made Re-investment of profits would lead to a self perpetuating development Lewis two-sector surplus (or unlimited supply of labor )model, which views agrarian societies as consisting of large amounts of surplus labor which can be utilized to spur the development of an urbanized industrial sector.

The Structure of the Lewis Model: Dual economy

The Law of Petty-Clark

(A survey of 50 countries) They discovered the phenomena of changes in industrial structure in the increasing order of share such as the primary industry < the secondary industry < the tertiary industry, according to the increase in the national income. Due to the income inelasticity of demand for the primary industry and to the decreasing returns of the secondary industry overtime.

Classification of Industry
Primary Industry Agriculture Forestry Fishing Secondary Industry Mining Construction Manufacturing Tertiary Industry Food Beverage Textile Wood Paper Products Chemistry Petroleum Coal Products Steel Metal Products Machinery Machine for Transport PrintingPublication

Electricity Gas
TransportationCommunication

WholesaleRetail trade FinanceInsurance Services Government Administration

I. Importance of structural transformation in agricultural development

The concept and contents of structural transformation: The evolvement of growth and development patterns, promoting increasing economic gains in the relatively limited endowments. ---productive resources allocation: natural, economic and human resources ---institutional evolvement ---technology innovation: expanding production possibility and improving efficiency of resources allocation ---industrial restructuring: ---employment restructuring Different stages needs different structure during the development process

Inter-linkage between structural transformation and agricultural development ---resources reallocation from low productivity sector to the high one: land, labor, financial resources ---promote agricultural sustainable growth: diversification, efficient factor and commodity market ---substantial increase of farmers income: higher returns and diversified income resources ---upgrading of agricultural sector: specialization and modernization --- structural optimization in the areas of production, investment and employment, etc.

for developing countries, there need a comprehensive agricultural structural transformation: ---assets distribution: initiative condition for sustainable growth ---institutional innovation: incentives ---economic structural adjustments ---technology innovation ---employment structural changes ---public goods and service delivery

II. Where does structural transformation take place

1. Structural changes within agricultural sector ---staple crops and cash crops ---farming and forestry, animal husbandry, fishery, etc. ---extensive cultivation and intensive cultivation ---operational organizations diversification: household, cooperative and specialized agricultural firms 2. Structural changes in rural areas ---agricultural sector and non-farm sector ---rural industrialization and urbanization ---capital flows and labor, land reallocation

3. Structural transformation in country-level ---balanced development between primary, secondary and tertiary industries ---transformation from traditional agricultural economy to modern one ---market system transition ---regional economic structural transformation ---the changes of terms of trade between different sectors and domestic and external market --- Dual economy

III. The factors determine structural transformation

---Factor endowment and its distribution ---Relative price changes of factors and commodities ---Economic and social Infrastructures ---Economic incentives and policy inducement ---Comparative advantages at household-, regional- and countrylevels and its changes ---Efficiency of market: transaction costs; access to market; market segments.

IV. Policy framework for agricultural structural transformation

1. Productive assets redistribution: ---land reform ---human resource development 2. Institutional arrangement ---property right ---market system ---price ---eliminate the constraints on smallholders ---develop rural organization system which could provide services for smallholders, strengthen their negotiation capacity and overcome constraints of capital-intensive investment.

IV. Policy framework for agricultural structural transformation

3. Technique policies --- R&D ---technical extension ---upgrading agricultural production Design and encourage adaption of new technology is the responsibility of public sectors 4. Public goods and service ---Physical infrastructure construction: road, irrigation and market ---vocational education and skill training 5. Eliminate market imperfection ---credit market ---factor market ---commodity market ---employment market 6. Industrial policy --- adjust based on the comparative advantages

V. Conclusions and implications

--- Structural transformation is very important to agricultural sustainable and inclusive growth --- For developing countries, it need to carry out a comprehensive policy framework on realizing structural transformation for agricultural modernization