Agriculture and the rest of the economy: macroconnections and policy restraints

The first two sections of the paper are devoted to a combination of Kuznets and structuralist stories, where we ask how the agricultural/nonagricultural terms of trade and income distribution must adjust to permit both savings and investment and commodity market balance to be assured. It will be shown that inflationary processes can easily be kicked off by terms of trade movements in the short run. In the next two sections we follow Chichilnisky in working out a longer run, Lewis-style model in which economic dualism plus an elastic labor supply can lead to severe problems with realization of the marketed surplus and agricultural exports abroad. A brief final section summarizes the major implications of the models for policy choice.