Historical case studies of China and Japan, however, provide support for the
idea that the agricultural sector can have a positive role to play in promoting
wider economic growth.
Lewis and Kuznets both believed that the role of the agricultural sector was
likely to decline as a poor developing economy experienced economic growth.
This decline would occur in both the share of the total labour force and the
share of total GDP accounted for by agriculture. This structural change can be
explained by both demand and supply factors. On the demand side Engel’s
Law states that as incomes rise above subsistence the share of income spent on
food declines and that on manufactured goods rises (a higher income elasticity
of demand for manufactured relative to agricultural goods). The basic idea is
that, unlike the demand for manufactured goods, the demand for food is
limited by the size of one’s stomach, though the contemporary global ‘obesity
crisis’ seems to suggest the size of stomachs may not have been as limited as
originally thought. On the supply side, the productivity and output growth of
agriculture is limited by the availability of land and possibilities of increasing
returns to scale, but manufacturing faces no such constraints. Increasing
returns to scale is a particular case where output increases by more than the
multiple of factors of production. For example, if all factors of production are
doubled, output more than doubles. At most agriculture can grow by 3 per cent
or 4 per cent per annum,while China has sustained manufacturing output
growth of 10–15+ per cent for nearly thirty years.
The theoretical discussion in the previous section is borne out by empirical
evidence. Table 8.1 shows that the widespread decline in agriculture’s share of
GDP across Latin America, Africa and Asia, has been most rapid in the rapidly
Economic Growth and Economic Structure since 1750 169Table 8.1 Agriculture’s share of GDP in selected Asian, African and
Latin American countries,1960, 1980, 2000 and 2010Agriculture, value added as a % of GDP
1960 1980 2000 2010Bangladesh 31.6 25.5 18.6
Bolivia 19.0 15.0 12.9
Brazil 20.6 11.0 5.6 5.3
Burkina Faso 39.8 29.4 29.3 35.4
Côte d’Ivoire 47.9 25.9 24.2 22.8
Ghana 45.2 60.1 39.4 29.8
Indonesia 51.5 24.0 15.6 15.3
India 42.6 35.4 25.1 18.0
South Korea 16.2 4.6 2.6
Malaysia 34.3 22.6 8.6 10.4
South Africa 11.2 6.2 3.3 2.5
South Korea 16.2 4.6 2.6Source:Data compiled from World Development Indicators(2013).