THE ROLE OF AGRICULTURE IN ECONOMIC-DEVELOPMENT - VISIBLE AND INVISIBLE SURPLUS TRANSFERS

The financial surplus of agriculture has been central to theories of t he role of agriculture in economic development. Morrisson and Thorbeck e (MT) have used a constant-price social accounting matrix (SAM) frame work to measure rigorously the financial surplus of agriculture and de compose the mechanisms of surplus extraction. History and theory have, however, stressed the role of prices as an invisible transfer mechani sm in addition to the visible transfers identified in the SAM framewor k. We extend the MT approach by defining and measuring the real surplu s of agriculture and decomposing the mechanisms of surplus extraction between visible and invisible financial transfers. Using an archetype computable general equilibrium model for poor African nations, we trac e the generation, transfer and use of an agricultural surplus created by a productivity gain in agriculture. This shows that prices indeed p lay an overwhelmingly important role in transferring a surplus from ag riculture to the benefit of the rest of the economy.