On Why Agriculture Declines with Economic Growth
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When economic growth is characterised by a slow rise in the demand for food
and rapid growth in farm relative to non-farm productivity, it is understandable
that agriculture in a closed economy declines in relative terms as that economy
develops. But why should agriculture decline in virtually all open growing economies
as well, including those able to retain a comparative advantage in agricultural
products? A key part of the answer is that the demand for non-tradable
goods . tends to be inc.o me elastic, so resources are diverted to their production
even m open economies.