1. Introduction

Development economists such as Rostow (1960) and Ranis and Fei (1961) have stressed a positive linkage between agricultural productivity and industrialization. The positive link, however, has been argued to be nonexistent by Matsuyama (1992) in a two-sector endogenous growth model of small-open economies with a low elasticity of agricultural goods and the existence of learning-by-doing only in the domestic manufacturing sector. (1) As a result of comparative advantage, higher agricultural productivity solicits labor inputs from the manufacturing sector in his ...

<0, V(0) = 0, V'><0 and [[PHI].sub.t] = H([G.sub.t]F([n.sub.t]) - H([G.sup.*.sub.t])F([n.sup.*])><0 if and only if [n.sub.0]><0 is an instantaneous, negative comparative advantage effect, element [tau]H'VF><0 at n = 0 and [[tau].sub.0]A([[delta].sub.0] + [[delta].sub.1] - [H.sup.*][F.sup.*])><1. Notice that Point [n.sup.c]: is smaller if [[delta].sub.1] is larger. On the other hand, the right-hand side decreases in [n.sup.c], with a value in the vertical axis of [chi][H.sup.*][F.sup.*]><[n.sup.2.sub.0]]) in Figure 3 are also demonstrated in Figure 4, with [n.sub.2]><0, and [[PHI].sub.t] = F([n.sub.t], [L.sup.M.sub.t], [K.sup.M.sub.t])H([G.sub.t]) - F([n.sup.*.sub.t], [L.sup.*M.sub.t], [K.sup.*M.sub.t])H([G.sup.*.sub.t])><0 if and only if [n.sub.0]><0 also generates a positive revenue effect through term -[tau]FH'AV'd[n.sub.t]/dA>

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