Rural-urban interdependence and industrialization

This paper presents a model of industrialization through rural-urban interdependence. It shows how an economy with a low cost share of industrial inputs in agricultural production and a low expenditure share of manufactured goods, together with a limited variety of industrial inputs, can be caught in a low development trap. By escaping from the trap the economy moves toward more roundabout methods of agricultural production, mass consumption of manufactured goods, and urbanization. The transition from the low development trap to industrialization is consistent with the historical evidence on Japan. (C) 2002 Elsevier Science B.V. All rights reserved.