Induced innovation and agricultural development
ABSTRACT Dr Ruttan reviews the five general models in the literature on agricultural development: the frontier, conservation, urban- industrial impact, diffusion and high pay-off input models, and finds them lacking. He outlines a model of agricultural development which treats technical change as endogenous to the development process, rather than as an exogenous factor operating independently of it. This leads to an emphasis on the strong relationship between technological and institutional change and a call for institutional innovation that will result in a more effective realisation of the new technical potential.
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ABSTRACT: . Much of past thinking about economic development started with a traditional lowincome rural agricultural economy losing its workforce to higher-paying jobs in the new, modern industrial sector. Hirschman and others proposed an alternative strategy for economic development in his unbalanced growth theory that focused on an industry rather than an entire sector or two of a developing nation's economy. Hirschman not only highlighted, but emphasized in significant ways, the role and importance of the private sector in economic development. Putnam and others take the social capital approach to economic development. We offer still another way of thinking about economic development strategy that builds on the activities within a local labor market area and its institutions for constructively engaging an active, public-spirited local citizenry. The local labor market approach contrasts with the earlier ways of thinking about economic development by its attention to local institutions in buil...02/1970;
Staff Paper Series
STAFF PAPER P71-1JANUARY 1971
Induced Innovation and Agricultural Development
Yujiro Hayami and Vernon W. Ruttan
Department of Agricultural and Applied Economics
University of Minnesota
Institute of Agriculture
St. Paul, Minnesota 55101
Staff Paper P71-I
Induced Innovation and AgriculturalDevelopment
Vernon W. Ruttan
Staff Papers are published without
of Agricultural and Applied Economics.
paperis based was supported by grants to the University
Economic Development Center and Agricultural
the Ford Foundation
Micro Aspects of Develo~ment
Campus) on November19-20, 1970.
formal review within
The research on which this
Station by theExperiment
and the U.S. Agency for
at a conference
The paper was presented
at the University
Induced Innovationin AgriculturalDevelopment<
Yujiro Hayami and Vernon W. Ruttan~~~
There has been a sharp transition in economic: doctrine with respect
to the relative contribution of agriculturaland industrial development
to national economic growth during recent decades.
There has been a
shift away from an earlier “industrialfundamentalism”
to an emphasis
on the significanceof growth in agriculturalproduction and productivity
for the total developmentprocess.
the process of agriculturaldevelopmentitself has,
with few exceptions,
remained outside the concern of most development
economists. Both technical change and institutional change have been
treated as exogenous to their systems,
In our view technical change representsan essential element in the
growth of agricultural productionand productivityfrom the very
beginning of the developmentprocess.
The process of technical change
in agriculturecan best be understood as a dynamic responseto the
resource endowments and economic environment in which a country finds
itself at the beginningof the modernization process.
The design of
a successful agricultural developmentstrategy in each country or region
involves a unique pattern of technical change and productivitygrowth
in responseto the particularset of factor prices which reflect the
economicimplications of resource endowments and resource accumulation
in each society.It also involves a complex pattern of institutional
evolutionin order to create an economic and social environment
conducive to the effective response by individuals, privatefirms and
public agencies to the new technical opportunities.
Any attempt to develop a model of agriculturaldevelopmentin which
technical change is treated as endogenousto the development process
rather than as an exogenousfactor that operatesindependently of
other developmentprocesses must start with the recognition that there
are multiple paths of technologicaldevelopment.
developed to facilitate the substitutionof relativelyabundant
(hence cheap) factors for relatively scare (hence expensive) factors
in the economy.
A second considerationin any attempt to develop an adequate model
of agriculturaldevelopmentis explicit recognitionof the role of the
public sector in the agriculturaldevelopmentprocess.
agricultural science and technology represent a necessarycondition
for releasing the constraintson agriculturalproductionimposed by
inelastic factor supplies.
Yet technicalinnovations are among the
more difficult products to producein a country in the early stages of
Institutionization of the process by which a
continuousstream of new agricultural technologyis made available to
a nation’s farmers is particularlydifficultto achieve.In most
coqntries which have been successfulin achieving rapid rates of
technical progress “socialization”of agriculturalresearch has been
deliberatelyemployed as an instrument of modernizationin agriculture.
The modernizationprocess has involved the development of both experi-
ment station and industrial capacity capable of producing the biological
(OT biologicaland chemical) and mechanical (or engineering and
mechanical)innovations adapted to factor supply conditions.
In this paper we extend the theory of “induced innovation” to
include the process by which public sector investment in agricultural
research, in the adaptationand diffusion of agriculturaltechnology,
and in the institutional infrastructure that is supportive of agricultural
is directed toward releasing the constraintson agricultural
productionimposed by the factors characterized by a relativelyinelastic
We then elaborate an operational model, suitable for testi.ng
the “induced innovation” hypothesis. Finally the model is tested
against the long term agricultural development experienceof Japan and
the United States.