Agriculture, Labor Intensive Growth, and Structural Change: East Asia, Southeast Asia, and Africa

In this paper, it is argued that physically abundant labor is not necessarily cheap labor. The latter depends upon the cost of food staples. Given the non-tradability of the latter, rapid growth without rapid agricultural productivity growth will make labor increasingly costly. This will make the transition to labor intensive manufacturing and the exportation of such products very difficult. More importantly, it results in a structural change process in which the economy skips manufacturing and instead shifts in to capital intensive services. The experiences of Taiwan, Indonesia, and Uganda are used to illustrate these ideas.