Portal de Periódicos da CAPES

Simon Kuznets' "Sectoral Shares in Labor Force": A Different Explanation of His ( I + S)/ A Ratio

1989; American Economic Association; Volume: 79; Issue: 5 Linguagem: Inglês

1944-7981

Günther Schmitt,

Fiscal Policy and Economic Growth

In estimating intersectoral productivity differences, Kuznets concludes that ...per worker product in agriculture is significantly lower than in industry and services. Agriculture's productivity backlog is explained by labor market failure especially in developing (structural dualism). However, by analyzing agriculture as economic activity organized by farm households competing with off-farm and household production, efficient allocation of resources in agriculture can be demonstrated. Therefore, productivity measurements based on the concept of the farm as a firm are misleading. A model of the farm household and empirical evidence are presented. In his seminal book Economic Growth of Nations, Simon Kuznets (1971) has systematically analyzed intersectoral productivity differences to be observed in almost all countries.' With respect to labor productivity in agriculture (A) as compared to industry and services (I+ S), he has found out that ... worker product in the A sector is significantly lower than in the I + S sector and intersectoral inequality in per worker product is greatest at the low per capita product and smallest at the high per capita product levels (p. 236). Hollis Chenery and Moises Syrquin (1975, p. 53) have confirmed, but somewhat modified Kuznets' findings by explaining that ... relative labor productivity in the primary sector falls from about 70 percent to 50 percent at income level of $500 and then gradually rises as agricultural technology is modernized and the surplus agricultural labor is absorbed by the rest of the economy. As far as developing are concerned, Kuznets (p. 156) illustrates this explanation by ...the most plausible combination... of economic determinants affecting ... an absolute decline in per worker product in the A sector resulting from increased pressure of population on land under conditions of relatively stagnant agricultural technology, and some rise in per worker product in the I + S sector resulting from a growth of modern components in industry and services. In discussing ... several explanations of intersectoral differentials in per worker product... (p. 238), Kuznets finally comes to the conclusion that ... whatever the formulation, the discussion tended justifiably to emphasize various aspects of duality in structure in the less developed countries (p. 247). He, thereby, confirms the dogma of structural dualism as the main source of disguised unemployment in agriculture, seen as ... the cornerstone of the theory of development of underdeveloped since the 1940s according to Paul Rosenstein-Rodan (1957, p. 1). Already in 1954, Arthur Lewis has generated a micro-model of agriculture within Economic Development with Unlimited Supplies of Labour, (1954), which during following years has been extended and modified by various development economists. 2 With respect to developed *Professor of Agricultural Economics, University of Gottingen, Federal Republic of Germany, Platz der Gottinger Sieben 5, D-3400 Gottingen. The author acknowledges helpful comments of two unknown referees to earlier draft of this article. 'Wide-ranging international differences in intersectoral productivity discrepancies have been already observed and discussed mainly with respect to agriculture by Marc Latil (1956), J. R. Bellerby (1956), and Colin Clark (1957). But none of them has provided a consistent explanation. Therefore, Clark (p. 254) had to admit that ...no immediate deductions can be drawn from the data. More recent information on far-reaching sectoral productivity differences between OECD-countries are provided by OECD (see Table 1). 2Various models of agriculture in a dual economy are discussed inter alia by Hans-Bemd Schafer (1983).