Is Human-Capital Investment Necessary to Modernization? The Effect of Rural Polytechnic Training in Dual Agriculture

In this chapter, we analyze the link between human-capital investment and agricultural modernization in a dualistic agricultural economy. We assume that human-capital investment in the context of agricultural dualism is distinct from that of simple traditional agriculture in that it gives top priority to developing the skills needed for production in the modern agricultural sector. Our aim is to investigate the likely consequences of investments and subsidies that provide polytechnic training to employees in the modern agricultural sector. To this end, we develop a three-sector general equilibrium model with which one can evaluate the effect of rural polytechnic training. Our research indicates that sector investments and government subsidies raise the output of the traditional agricultural sector but conditionally raise the output of the modern agricultural sector. Moreover, sector investments and government subsidies each have greater effects on the development of the traditional sector than they would on that of the modern sector. These, nevertheless, are not conducive to the agricultural modernization.