Imperfect Factor Mobility, Agricultural Producer Service and Agricultural Development in Developing Economy

Agriculture in developing countries operates on small-scale land that hinders the utilization of modern inputs. The agricultural producer service sector which acts as an intermediate sector facilitates this process. We build a three-sector general equilibrium model to investigate the relationship between imperfect factor mobility and agricultural development by incorporating the agricultural producer service sector. Results show that a rise in capital mobility expands the agricultural sector and promotes agricultural productivity, while an increase in labour mobility cuts down the output of the agricultural sector and its productivity.