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Interactions between Agriculture and Industry: Theoretical Analysis of the Consequences of Discriminating Agriculture in Sub–Saharan Africa

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  • Jørn Rattsø
  • Ragnar Torvik

Abstract

Many countries in sub–Saharan Africa discriminated against agriculture to promote industry after independence. The domestic terms of trade were turned against agriculture by the price fixing of monopoly marketing boards. This policy was assumed to reduce labor costs of industry and was combined with overvaluation of the currency, protectionism, and priority rationing of imported inputs to industry. The region got the worst of both worlds—stagnation in both agriculture and industry. What went wrong? In a dual model designed to represent characteristics of the region, discrimination of agriculture is shown to contract industry through trade linkages. Export–oriented agriculture has been held back, and import–dependent industries have suffered because of the foreign exchange constraint. In a dynamic extension assuming learning–by–doing in industry and catching–up in agriculture, it is shown that discrimination against agriculture may reduce the growth rate of the economy and the technological advantage of industry.

Suggested Citation

  • Jørn Rattsø & Ragnar Torvik, 2003. "Interactions between Agriculture and Industry: Theoretical Analysis of the Consequences of Discriminating Agriculture in Sub–Saharan Africa," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 138-151, February.
    • Handle: RePEc:bla:rdevec:v:7:y:2003:i:1:p:138-151
    DOI: 10.1111/1467-9361.00181
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    Cited by:

    1. Jørn Rattsø & Hildegunn Ekroll Stokke, 2003. "Learning and Foreign Technology Spillover in Thailand: Empirical Evidence on Productivity Dynamics," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 29, pages 47-66.
    2. de Souza, Joao Paulo A., 2015. "Evidence of growth complementarity between agriculture and industry in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 1-18.
    3. Benjamin N. Dennis & Talan B. Işcan, 2007. "Agricultural Distortions, Structural Change, and Economics Growth: A Cross-Country Analysis," Working Papers daleconwp2007-03, Dalhousie University, Department of Economics.
    4. Baba, S.H. & Wani, M.H. & Zargar, B.A. & Malik, H.A., 2014. "Imperatives for Sustenance of Agricultural Economy in the Mountains: A Prototype from Jammu & Kashmir," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 27(2).
    5. Jonaki Sengupta & Ranjanendra Narayan Nag & Bhaskar Goswami, 2017. "Commodity Price Fluctuations and Unemployment in a Dependent Economy," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 11(3), September.
    6. Yifu Lin, Justin & Li, Zhiyun, 2008. "Endogenous Institution Formation under a Catching-up Strategy in Developing Countries1," Policy Research Working Paper Series 4794, The World Bank.

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