Simulating A Developing Economy With Modernizing Agricultural Sector PDF Download

The study critically analyzes the implication of various agricultural development policies on urban unemployment and income distribution. More specifically it focuses on the evaluation of agricultural policies at the macro-economic Level in the Nigerian economy. A system science and simulation approach is used to build and test a ten sector macro-economic model of the Nigerian economy to investigate the problem. The model simulates consumption, investment, employment and production endogenously. Validation of the model shows that it is capable of describing the major trends in the Nigerian economy for recent history. By interacting with a detailed agricultural sector model, the macro-model enables evaluation of agricultural policies in the context of the total economy after taking account of the important interactions between the agricultural and nonagricultural economies. In particular the model enables some measures of income distribution and employment to be included as targets of economic development planning together with the conventional target of growth. The model predicts that if current agricultural policies are continued, urban unemployment and income disparities will become increasingly more serious in Nigeria. Furthermore, the income differential between agriculture and nonagriculture is predicted to widen leading to a continuing increase in the rate of labor migration out of agriculture. The evaluation of two sets of agricultural policies, export crop modernization and food crop modernization, leads to a serious questioning of the present emphasis among development economists on agricultural development as a means of steadying the flow of rural-urban migration and reducing urban unemployment and rural-urban income inequities. Because of the considerable multiplier effects of increased agricultural incomes on nonagricultural incomes, both agricultural policies produced a wider differential between agricultural and nonagricultural incomes stimulating further labor migration out of agriculture. This effect was particularly acute in the case of the food modernization policy where the terms of trade turned against agriculture. Nevertheless both sets of policies and particularly the export modernization policy improved the disparity in self-employed earnings and wage earnings and produced a steady rise in nonagricultural self-employed earnings which, under current policies, were predicted to stagnate because of rising urban unemployment. Other policies to restrain wages and increase government employment demonstrated the considerable trade-off between various groups of the population arising out of the complexity of interactions between the agricultural and nonagricultural sectors. The macroeconomic simulation model is suggested as a useful approach to development planning where there is need to consider interactions between sectors and trade-offs between targets of development.