Environment and economy in the modern agricultural development^*

* Accepted by Suresh Radhakrishnan.

Abstract

This paper establishes a three-sector general equilibrium model to investigate the environmental and economic effects of policies intended to promote modern agriculture. In the model, two situations are considered: In the first situation, the perfect mobility of capital between the capital-consuming sectors is assumed, and in the second situation, there is perfect mobility of land between the land-using sectors, keeping perfect mobility of capital assumption unchanged. The main conclusion is that the environmental effect of interest subsidization for modern agricultural sector is superior to other subsiding policies of factor prices.

Keywords:

• Environment
• labor migration
• modern agriculture

Notes

* Accepted by Suresh Radhakrishnan.

1. The long-existing institutional obstacles in developing countries have resulted in the stagnation of capital flows between the urban and rural sectors (Li and Shen 2012). However, certain developing countries have promoted the ‘modern agriculture’ business, leading urban capital to flow to rural sector.

2. It is implicitly assumed that unemployed labor is supported by employed labor, such as other members of the family, or, alternatively that the job is allocated daily (or monthly and so on) to all applicants by lottery.