Immiserized Growth in Liberalized Agriculture

Abstract

This paper offers a simple model that reconciles rivalrous claims about liberalization's impact on low-income agrarian economies; growth can accompany smallholder welfare reduction. The model developed here reverses the causality of Bhagwati's immiserizing growth model:price shocks cause welfare effects that drive output response, rather than output shocks causing price shocks and then welfare effects, as in the trade theoretic original. Immiserized growth seems a plausible explanation for some important cases — e.g. the Malagasay case considered here — in which liberalization appears to have engendered both real agricultural growth and heightened food security stress among smallholder food producers.

Keywords: Africa, immiserizing growth, Madagascar, peasants, structural adjustment, welfare analysis