A study on urban private capital and the transfer of labor in the modern agriculture sector

Abstract

As urban private capital enters the modern agriculture industry, it divides the agricultural sector into the modern sector and the traditional sector. This article establishes a general equilibrium model to study the economic impact of governmental policies aimed at promoting modern agriculture. The main conclusions of this article are that interest subsidies implemented by the government to promote modern agriculture can reduce the transfer of labor from the rural areas to the cities, but encourage the movement of rural labor to the modern agricultural sector. Conversely, wage rate subsidies for the modern agricultural sector will lead to rises in the urban unemployment rate and a decrease in the quantity of labor in the traditional agricultural sector.

Keywords:

• private capital
• modern agriculture
• transfer of labor

JEL Classification:

• J60
• I30
• R10

Acknowledgements

We express our thanks to the anonymous referees for their constructive comments and suggestions. Financial supports are provided by the National Social Sciences Fund Project No.10BJL035 and Key Project of 2009 for Key Research Bases for Humanities and Social Sciences of the Ministry of Education No.2009JJD7900.

Notes

1. There are precedents in China, see Zheng et al. (2009) and Wang (2011).