The role of the agricultural sector in the economic development of Pakistan: Intersectoral resource flows and growth linkages

In the economic development literature there is a debate regarding the role of the agricultural sector in the economic development of less developed countries (LDCs). One school of thought, known as the conventional school, argues in favor of a squeeze of the agricultural sector to transfer the resources to the nonagricultural sector for economic development. This can be done either by raising agricultural taxes or by maintaining domestic terms of trade against the agricultural sector. The advocates of the other school, known as the sectoral complementarity school, also believe that the agricultural sector should contribute resources toward the development of the nonagricultural sector. But they argue that since agriculture is generally a stagnant sector in the LDCs, in the long run its squeeze will hurt the economy. They hold that, if squeezed, the agricultural sector will not be able to continuously generate the agricultural surplus needed for economic development in the nonagricultural sector. This school argues that agriculture should be promoted as its growth will contribute to the growth of the nonagricultural sector through the transfer of agricultural surplus and growth linkages with industry.;This research examines the role of the agricultural sector in the economic development of Pakistan during the ten-year period 1972-81. It estimates the intersectoral resource flows and the growth linkages between agriculture and the industries in the nonagricultural sector. Using T.H. Lee's model this study finds that Pakistan's agriculture enjoyed a favorable treatment and there was no squeeze on it. The findings show that there was a net real outflow of resources from agriculture but it was proportionately less than such transfers in Taiwan and Japan during their comparable periods of economic development. Agriculture's forward production and consumption linkages were found to be more labor intensive.;The research concludes that the relatively poorer performance and agriculture was due to the low yield per hectare in Pakistan. The study recommends policy measures to improve yield and resource transfer.