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Using a simple neoclassical type growth model including both man-made and natural capital as inputs to production, thetheoretical basis for aU-shaped relationship between agricultural intensification and farm household investment in renewableresource capital is established. As development of technology, infrastructure, or markets increase the relative return toinvestment in man-made capital over natural capital, resource depletion occurs as man-made capital is substituted for lowerreturn natural capital. Once returns are equalized, both man-made and natural capital are accumulated. If labor and these formsof capital are complementary, the output effects outweigh the substitution effects in the long run, leading to net accumulationof natural as well as man-made capital as a result of such technological or market development. Population growth alsoinduces investment in both man-made and natural resource capital in the long run by increasing their marginal products.However, population growth causes declining per capita levels of both natural and man-made capital and production per capitain the long run, if technology is fixed and decreasing returns to scale. The model thus supports the Boserupian argument ofinduced intensification and resource improvement, as well as the Malthusian argument of the impoverishing effects ofpopulation growth. However, population growth may also induce development of infrastructure, markets, and technological orinstitutional innovation by reducing the fixed costs per capita of these changes, though these developments may not occurautomatically. Government policies can play a large role in affecting whether these potential benefits of population growth arerealized. In addition, credit policies may reduce resource degradation caused by substitution of man-made for natural capital,by allowing farmers to accumulate man-made capital (such as fertilizers) without depleting their natural capital. Policies tointernalize the external environmental costs of using man-made capital will reduce both types of capital and production,indicating a clear trade-off between addressing environmental concerns on the one hand and reducing poverty and promotingresource conservation investments on the other. By contrast, internalizing the external benefits of investments in resourcesincreases wealth and production per capita in the long run. The 'intertemporal externality' due to a higher private than socialrate of time preference does not justify interventions to promote investments in resource capital; rather it argues for thepromotion of savings and investment in general. © 1998 Elsevier Science B.V. All rights reserved.

Subject(s): Production Economics

Research and Development/Tech Change/Emerging Technologies

Issue Date: 1998-09

Publication Type: Journal Article

PURL Identifier: http://purl.umn.edu/174538 Published in: Agricultural Economics: The Journal of the International Association of Agricultural Economists, Volume 19, Issue 1-2 Page range: 99-112

Total Pages: 14

Record appears in: International Association of Agricultural Economists (IAAE) > Agricultural Economics: The Journal of the International Association of Agricultural Economists





Autor: Pender, John L.

Fuente: http://ageconsearch.umn.edu/record/174538?ln=en







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