Research on Effects of Integration of Primary, Secondary, and Tertiary Industries in Rural Areas of Developing Countries: An Approach of Rural Capital Subsidies

We set up a four-sector general-equilibrium model and a rural industrial integration indicator to investigate impacts of capital subsidies given to capital-using sectors in rural industrial chain on rural industrial integration and social welfare. Our findings are as follows: Rural capital subsidies can enhance rural industrial integration (but need to satisfy certain conditions in the short run) and reduce economic gap between urban and rural areas. In numerical simulation part, we discover that capital subsidy for rural secondary industry has a more favorable impact on rural industrial integration, social welfare, and narrowing urban-rural economic gap than rural tertiary capital subsidy.