A Forgotten Chapter in the "East Asian Miracle":The Contribution of Agriculture

The Structural Transformation in Historical Perspective

(Harvard Econ 2390a)Final paper

Octavio Damiani

Cambridge, MAApril 1995

I. Introduction

The recent World Bank report The East Asian Miracle: Economic Growth and Public Policy1 has been one of the most controversial studies of East Asian development. The role of the state on the impressive record of high economic growth experienced by many East Asian economies and the type of policy interventions necessary to promote industrialization have been at the center of the polemic. The World Bank report recognizes that some East Asian governments intervened extensively, but it argues that the explanation of success has to do with a "market-friendly approach" and "getting the basics right." In other words, the fast growth rates of these countries relates to reaching high savings and investment levels, investing heavily in education, limiting price distortions, and opening themselves to foreign investment. While the report recognizes that broad government intervention characterized policies of most Asian countries, it argues that the high performing East Asian economies could have grown as fast or even faster if their governments had intervened less or not at all. Furthermore, it stresses that industrial policies were ineffective because little evidence is found to demonstrate that they have affected the industrial structure and productivity.

This paper focuses on issues neglected by "The East Asian Miracle": the important role played by agriculture in these countries' early stages of development, and the relevance for overall economic growth of specific policies that their governments implemented toward agriculture and rural development.2 The neglect of agriculture characterizes not only the World Bank's "East Asian Miracle", but also most of its critiques. For example, Amsden (1994) emphasizes that the evidence presented by the World Bank's report is weak and filtered, failing to cite original sources and to incorporate in the debate opposing views from major scholars in the fields of trade, finance, and labor organization. Lall (1994) emphasizes that the empirical evidence is selective and incomplete, and the interpretation tendentious and biased. In addition, she stresses the problem of looking at each intervention separately rather than as a part of an overall strategy, which makes it impossible to evaluate it. For example, she argues that credit interventions would not have worked if they had not been integrated with other policies, such as protection and technological promotion. Perkins (1994) stresses that the World Bank oversimplifies the interpretation of East Asian development, trying to force into a single model at least three different models of development. While these authors emphasize that the governments of these countries were highly interventionists, they hardly make reference to the role of agricultural policies, implying that what mattered most in the success of East Asian late industrializers was policy interventions toward the industrial sector.

In this paper, I review the experience with agriculture of three success stories in East Asia: Japan, Taiwan, and South Korea.3 Many reasons explain the neglect of agriculture in most interpretations of these economies' success. First, all three countries have a small land per capita 1    ? World Bank (1993). The East Asian Miracle: Economic Growth and Public Policy. New York: Oxford University Press.

2    ? Agriculture is here broadly defined in terms of the primary sector, including food and non-food crops, livestock, fisheries, and forestry.

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ratio, which is frequently erroneously associated with an unimportant agricultural sector. Second, the analysis of the three economies in the last two decades shows a relatively small and declining agricultural sector both in terms of output and employment. During the 1980s, the average share of agriculture in the Gross Domestic Product (GDP) was only 2.6% in Japan, 5.9% in Taiwan, and 12.6% in South Korea (Hayami & Yamada 1991). Third, the governments in all three countries have consistently protected agriculture against foreign competition with high tariffs during the last two decades. Such a high protection reinforces the idea of an inefficient agriculture.

The reasons mentioned above contribute to the generalized idea that the agricultural sector in Japan, South Korea, and Taiwan has always been unimportant and inefficient, and that the success of their economies relates exclusively to the implementation of policy interventions targeting the industrial sector. In contrast to these views, I argue that agriculture played an important role in the process of industrialization in at least two of these cases--Japan and Taiwan. While the governments in these countries taxed agriculture heavily and transferred resources to develop the industry, they also considered agriculture important, providing it with resources and a favorable policy environment at early stages of development. These policies led to high rates of growth of output and productivities in agriculture and had a substantial impact on overall economic growth and income distribution.

The paper is divided into four sections. The first section focuses on the contribution of agriculture to the process of structural transformation through the transfer of labor and capital. The second section concentrates on government interventions toward increasing the productivity of agriculture and on the effects of agricultural growth in overall economic growth. The third section focuses on the effects of land reform on promoting broadly distributed economic growth. The fourth section presents a summary and the conclusions of the paper.

II. The contribution of agriculture to industrialization

The contribution of agriculture to the process of structural transformation in the three cases studied here took place in three ways:

a) The agricultural sector was a source of elastic labor supply for the industry in all three cases. Migration of rural labor to urban areas prevented the rise in the wage costs of the industry in spite of the increase in the urban demand for labor, providing the basis for a rapid accumulation of industrial profit. In Japan, for example, the movement of the labor force from agriculture to industry in the Meiji era was about 170,000 workers per year (Namiki 1957, Umemura 1970). This represented a growth in the supply of labor in the non-agricultural industries of 3% to 4% annually (Umemura 1970).b) Agriculture provided surpluses that governments mobilized to finance industrialization when there was no accumulated industrial capital in Japan and Taiwan. In Japan, for example,

3    ? The review includes studies of agriculture in these three countries, most of them under a historical and sectoral perspective.

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revenue from the land tax comprised the main government source of funds in early stages of industrialization, making up almost 80% of the Meiji governments' fiscal revenue (see table 1). The tax burden on agriculture remained as high as 10% of total net agricultural income until the late 1920s, compared to 5% of the net income of non-agricultural activities (see table 2). These revenues were largely used to finance public investment for industrialization and to import modern plants and technology through government programs (Ranis 1959, Rothacher 1989). Also, landlords invested a high portion of their rent income in banks and other non farm activities (Kato 1969).

In Taiwan, farmers had to sell their rice to a government agency, the Taiwan Provincial Food Bureau, which paid a price lower than the market price.4 In addition, the government provided credit for working capital to farmers and monopolized the supply of chemical fertilizers. Farmers had to pay back both credit and fertilizers in terms of rice valued at the same low government price. Land taxes and land received from the agrarian reform also had to be paid in terms of rice. All these gains were higher than the income tax until 1960 (see table 3). From 1951 to 1955, the net outflow of capital from agriculture was about three-fourths of the total capital formation (Lee 1971, Yager 1988). The relative importance of this capital outflow fell during the rest of the 1950s, and its total size declined in the 1960s.

Table 1. Share of the land tax relative to the government total tax revenues in Japan.

Year Land tax (% of total tax revenues)

1870 73.9

1880 72.9

1890 51.7

1900 24.6

1910 15.9

1920 6.2

1930 4.8

Source: Based on data from Ranis (1959), p. 43.

4    ? The share of rice under government control was higher than 60% in average between 1950 and 1959 (Kuo 1983).

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Table 2. Tax burden on agriculture and non-agricultural activities in Japan.

Year Tax burden on agriculture (% of net income)

Tax burden on non-agricultural activities (% of net income)

1878-1882 16.9 2.2

1884-1887 22.1 3.0

1888-1892 15.5 2.3

1894-1897 12.4 2.0

1898-1902 12.1 3.2

1903-1907 11.2 5.4

1908-1912 12.6 6.4

1913-1917 11.8 4.5

1918-1922 9.2 5.4

1923-1927 10.5 5.2

1928-1932 9.7 4.3

1933-1937 7.8 4.2

Source: Based on data from Ranis (1959), p. 48.

Table 3. Government "hidden tax" from the purchase of rice.

Year Hidden rice tax (% over rice revenues at market prices)

Hidden rice tax as a % of income tax

1952 42.7 107.2

1955 38.4 106.1

1960 43.2 104.6

1965 33.1 82.5

1970 20.5 14.3

1971 16.4 8.5

Source: Based on data from Kuo (1983), p. 35.Note: The "hidden tax rice" comprises the collections resulting from the government

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purchase of rice at prices lower than the market price.

In contrast to Japan and Taiwan, the agricultural sector did not contribute substantially to the mobilization of domestic savings in Korea (Jo 1982, Bal et al. 1982). Foreign savings represented the main source for the import of capital equipment and inputs for the industry, with agriculture and taxes to the agricultural sector not contributing substantially to capital formation.

c) Agriculture also provided foreign exchange necessary for purchasing machinery and technology for industrial development. In Japan, for example, agricultural exports of products such as tea and silk comprised 80% of the total exports during the Meiji restoration (Ogura 1963, Hemmi 1970). In Taiwan, agricultural exports comprised more than 90% of total exports between 1950 and 1955, and they were as high as 58% in 1965 (Yager 1988). Korea, agricultural exports comprised more than 50% of total exports until the Second World War, declining to 22% between 1961 and 1965 (Ban et al 1980). These earnings were used essentially to finance machinery and industrial technology imports (Rothacher 1989).

III. Agricultural growth and overall economic growth

Although the governments of Japan, Taiwan, and Korea took resources from agriculture and used them to promote industrialization, they supported agriculture in the early stages of development, investing heavily in infrastructure, promoting rural education, creating institutions of agricultural research and higher agricultural education, and supporting farmer associations. This led agricultural output and productivity to grow at high rates in the three countries before and during the early period of industrialization, which had a positive impact in overall economic growth.

Japanese agriculture was characterized by rapid growth between 1880 and 1920, with similar growth rates than the industry (see table 4). After stagnating in the interwar period, agriculture recovered rapidly after the Second World War and continued to grow at high rates until the middle 1960s. Agricultural output in Taiwan grew 3.6% between 1913 and 1937, and land and labor productivities increased almost 3% annually, far higher than the rates in Japan. In Korea, technological improvement lagged behind before the Second World War, but agricultural output and productivities grew at high rates in the post-war period.

Table 4. Growth rates of agricultural output, inputs, and productivity in Japan, Korea, and Taiwan.

Total output

Total input

Total productivity

Labor productivity

Land productivity

Japan 1880-1935

1.8 0.5 1.3 1.9 1.4

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1950-1970

3.2 0.8 2.4 6.3 3.1

1970-1985

0.5 -0.6 1.2 4.3 1.2

Taiwan 1913-1937

3.6 2.6 1.0 2.9 2.7

1951-1981

4.1 2.5 1.6 5.1 4.0

Korea 1920-1939

1.6 1.6 0.0 1.1 1.5

1946-1980

3.8 1.2 2.5 3.9 3.4

Source: Based on data from Hayami & Yamada (1991), pp. 50-52.

The success of Japanese agriculture was the result of decisions taken in the Meiji period. Public investments in agricultural research and the support of research institutions led to the development and diffusion of land-saving innovations, such as high-yielding varieties of major cereal crops--especially rice (Hayami 1975, Hayami & Yamada 1991). The government complemented these efforts with investments complementary with the seed-fertilizer technology, mainly irrigation and drainage facilities. It also created agricultural development banks to provide long-term credit between 1896 and 1900.These banks received subsidies and other special privileges, which enabled them to provide long-term credit at lower interest rates than ordinary banks (Kato 1970).

Agricultural growth in Taiwan and Korea--both under Japanese colonial rule before the Second World War--was highly affected by the need of the Japanese to supply their own food needs. In Taiwan, the Japanese focused on the production of rice and sugarcane. In order to increase production, they introduced chemical fertilizer, improved rice and sugarcane varieties, and irrigation--irrigated land rose 70 percent in the period (Ho 1966, Ho 1978, Koo 1968). As a result, multiple-cropping increased substantially. In addition to large investments in new technology, the Japanese colonial authorities created rural institutions, including farmer associations and experiment stations, which facilitated the diffusion of new crop varieties. Besides, Japan contributed with a continuous inflow of Japanese technical and professional personnel. For example, the Japanese established a cadastral system, classifying the land in categories following a detailed investigation of quality and ownership. This raised tax revenues and paved the way for land reform. In Korea, the Japanese focused on the promotion of rice. The Japanese Colonial Government created an extension service and made agricultural credit available (Ban et al. 1980). Large amounts of rice were exported to Japan, while Koreans

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themselves shifted to eating a larger amount of the coarser grains.

The growth of agriculture at early stages in the development process affected positively overall economic growth in many ways:

First, the dynamism of agriculture provided food at low prices, which allowed to meet the demand of an increasing urban population and to maintain the wage costs of the industry stable. In Japan, for example, foodgrain production alone grew at 160 percent the population growth rate between 1880 and 1920 (Hayami 1975). In Korea, agriculture grew at 3.5 percent annually between 1952 and 1971, a higher rate than most regions in the world5 and higher than its population growth (Hayami 1975). Without such a fast growth of agriculture, food prices would have increased and pushed up the wage rate in the industrial sector.

Second, agriculture contributed to the growth and quality improvement of industrial activities through demand and consumption linkages. One-quarter of the occupied population in rural Taiwan and about one-fifth of those in rural Korea were engaged in non-agricultural activities in the early 1930s. Rural industries accounted for 41% of the total employment in manufacturing in Korea as late as 1960; in Taiwan, they accounted for 37% of the employed in manufacturing in 1956 (Ho 1982). While part of these manufacturing activities involves the processing of agricultural products (forward linkages), such as the canning of fruits and vegetables, an important proportion consists of metal-work shops that manufacture and repair simple agricultural tools (backward linkages) and the production of goods consumed by the rural population, such as furniture, cakes, and sweets (consumption linkages). Ranis and Stewart (1987) stress that agriculture in Taiwan developed substantial consumption linkages because rural incomes were equally distributed. A large part of these industries are small scale and use labor-intensive technologies. Ranis (1978) argues that the growth of industries and services mutually interacting with dynamic agriculture was a decisive force behind the good income distribution because it provided additional employment and income to rural households, especially to the landless workers--the poorest of the "freed" agricultural labor force. These non-agricultural activities determined the absence of a massive rural-urban migration.

IV. The effects of agricultural price policies

Another mechanism by which agriculture played an important role in the development of these countries was through the effects of price stabilization on the reduction of risks for investors and on income distribution. In Japan, for example, the state has intervened actively to stabilize the price of agricultural products. Price policies were framed by the Food Management Law (1942) for rice, wheat, and barley, the Farm Product Price Stabilization Law (1953) for soybeans, potatoes, and starch, the Silk Price Stabilization Law (1951) for raw silk and cocoons, the Animal Product Price Stabilization Law (1961) for dairy products and pork, the Tobacco

5    ? For example, Latin American agriculture grew at 2.9% in the same period, North American 1.6%, and African 2.9% (Hayami 1975).

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Monopoly Law (1944) for tobacco, and the Beet Production Promotion Provisional Measure Law (1953) for beets.6 In the case of rice, the government directly purchased all the domestic production and imports. During the 1950s, the price of rice paid to farmers was consistently under the market price, but small producers received a higher price to ensure them an income comparable with that of an urban worker (Ashikaga 1963). In wheat and barley, the government was in charge of imports, which were used to stabilize the domestic prices. For the rest of the products, government agencies purchased them at a price higher than a floor price and stored the surpluses to stabilize prices. As a result of these policies, the prices of agricultural products in Japan were very stable.

In Taiwan, the state also intervened actively in the markets of rice, sugarcane, and other agricultural products (Kuo 1983). Like in Japan, maintaining a stable price of rice--the most important staple--was an explicit policy, so the government strictly intervened and controlled the rice market, making compulsory for farmers to sell part of the rice to the government. During the period 1950-59, the share of rice under government control reached 62% of the total, falling in 1960-70 to 53%.

Because the price paid to farmers was lower than the market price, an average of two thirds the wholesale market price during the 1950s, the area under rice declined. However, the government offered at the same time incentives for the production of other crops, such as sugarcane, corn, mushrooms, asparagus, citrus, pineapples, onions, and sorghum, guaranteeing prices to farmers and distributing the product to processing factories (Kuo 1983). Thus, these government policies ensured a low and stable price of rice to consumers and gave at the same time incentives to farmers for switching to higher value crops whose demand was increasing with the higher income of the population. As a result of these policies, the share of rice in agricultural gross product fell from 50.2% to 29.1% and the share of fruits, vegetables, and livestock products increased from 21.5% to 51.9% between 1952 and 1971. For example, asparagus were first brought into production in 1963, and they comprised 25.6% of total agricultural production in 1971. In addition, many of these products soon started to be exported in canned form. For example, mushrooms were 27.4% of the total agricultural production in 1971, 87% of the production being canned and 93% exported.

V. Land reform, agricultural growth, and income distribution

One of the features common to all three countries is the implementation of a land reform preceding the stage of rapid industrialization. In all three cases, land reform took place immediately after the Second World War. The American occupation authorities planned and implemented the land reform programs in Japan and Korea, aiming to break the power of the landowners, who had been associated to the regime existing during the war. In Taiwan, the government had the strong incentive of keeping the Communists--who had taken over mainland

6    ? For an analysis of price policies in Japan during the fifteen years after the Second World War, see Ashikaga (1963).

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China--from exploiting discontent in the countryside. The U.S. provided technical assistance and substantial funding for carrying out the land reform.7 Land reform had a positive effect on agricultural output and on income distribution, redistributing wealth and leading to a pattern of more broadly distributed economic growth.

In Korea, land reform after 1947 eliminated tenancy altogether, turning most of the cultivated land over to the families cultivating it. The number of tenants fell from 49% to 5% and the amount of rented land dropped from 60% to 15% of the total between 1945 and 1960 (see table 7).

In Japan, land reform consisted of the transfer of property from non-resident and resident landowners to tenant farmers with almost no compensation for landowners (Kawano 1970, Dore 1984). In addition, it regulated terms and conditions of tenancy, stipulating a minimum tenancy period of three years and a maximum rental rate depending on the type of fields. Furthermore, it brought the rent levels under strict control, restricted the transfer of ownership of land between farmers, and forbade the ownership by non-residents. As a result of land reform, the area of tenanted land fell from 46% to 10% and the proportion of tenant farmers from 28% to 5% between 1945 and 1950 (see table 5).

In Taiwan, land reform took place in three phases: rent reduction, sale of public land, and compulsory purchase of excess land from landlords and resale to tenants.8 Rent reduction consisted of a program of farm rent limitation in which no rent could exceed 37.5 percent of the total annual yield of the main crop. Sale of public land was made possible by the government takeover of about 180,000 hectares of farmland after the war that had belonged to Japanese government agencies and private citizens. This area was 20 percent of Taiwan's arable land, and 58.9 percent had been leased to tenant farmers by 1946. The "Land-to-the-Tiller Program" was implemented between 1953 and 1954, making 170,000 hectares of land--almost 20 percent of Taiwan's farmland--available for compulsory purchase. The rent limitation program affected 300,000 farm families (44.5 percent of all farmers excluding landowners); more than 120,000 families bought a total of 61,000 hectares of public land, and more than 154,000 hectares (23.4 percent of all private farmland) were transferred from landlords to tenants. A total of 224,000 tenant families, or 39.5 % of all farm families ---excluding landlords-- benefitted from the programs. The area transferred to tenants through the public land sale program and through the land-to-the-tiller program amounted to 71% of the total area of public and private lands (Mao 1982).

Table 5. Percentage distribution of farm households by ownership status in Japan.

Year Owner- Part- Part- Others

7    ? See Shen (1970) for an analysis of American cooperation in Taiwan through the Sino-American Joint Commission on Rural Reconstruction, a bilateral organization created in 1946.

8    ? For evaluations of Taiwan's land reform, see Koo (1968), Kuo (1983), Yang (1970), Mao (1982), and Yager (1988).

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operators owner operators-part tenants

tenants-part owner operators

Tenants

1941 31.2 20.7 20.0 27.7 0.4

1947 36.5 20.0 16.9 26.6 0.0

1950 61.8 25.8 6.7 5.0 0.7

Source: Dore (1984), p. 176.

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Table 6. Percentage distribution of farm households by ownership status in Taiwan.

Year Owner-operators

Part-owner operators

Tenant farmers

1945 29.8 29.5 40.7

1953 54.9 24.1 21.0

1960 64.5 21.2 14.3

1965 66.8 20.6 12.6

Source: Mao (1982), pp. 735.

Table 7. Percentage distribution of farm households by ownership status in South Korea.

Year Owner- operators

Part-owner operators-part tenants

Part-tenants-part owner operators

Tenants

Others

1945 13.8 16.4 18.2 48.9 2.7

1947 16.5 38.3 * -- 42.1 3.1

1964 71.6 14.8 8.4 5.2 0.0

Source: Bal et al. (1980), p. 286, originally in Pak (1966).

Land reform had the following effects:

1) It redistributed wealth and incomes from landlords to tenants and led to a better income distribution when rapid growth and industrialization started. Ranis (1978) stresses that the land reform in all three countries had a substantial impact in the reduction of the Gini coefficient in the 1950s. However, he does not relate land reform with the favorable performance of the Gini coefficient over time. In contrast, other authors argue that the elimination of disparities through the redistribution of asset ownership in the period before rapid industrialization and economic growth explains the good performance of these countries in broadly distributing the benefits of growth in the last three decades.9 In part, this effect occurred because land reform ensured that the growth in productivity of agriculture that took place afterwards was broadly distributed (Kuo 1983, Mao 1982).

2) It contributed to increases in output and productivity in agriculture. Binswanger & Deininger (1993) stress that because land reforms in Japan, Korea, and Taiwan transferred ownership from

9    ? Among other supporters of this argument, see Adelman (1975 & 1979), Adelman & Robinson (1978), and Rao (1978).

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landlords to tenants who already were managing operational units, they led to a stable system of production relations. Land reform did not require changes in the organization of production and the beneficiaries already had the skills and implements necessary to cultivate their fields. The increase in output and productivity relates to improved investment incentives for former tenants, and with increased security of tenure (Binswanger & Deininger 1993, Callison 1983, Dorner & Thiesenhusen 1990).

3) It indirectly promoted industrialization. The better distribution of income generated by land reform strengthened the degree of local linkages of agriculture with non-agricultural activities (Kawano 1970, Ranis & Stewart 1987). For example, the purchase of consumer goods from farmers in Taiwan rose 56 percent between 1950 and 1955 (Koo 1968).4) Land reform may have contributed to out-migration and the supply of educated labor to the industry because it increased the ability of farmers to pay for the education of their children (Koo 1968). 5) Along with food price policies discussed earlier, land reform contributed to a shift toward more labor-intensive crops (mainly fruits and vegetables), providing the basis for the development of food industries. This happened as a result of three mechanisms. First, the change in tenant conditions. Ownership created an incentive to produce more because the tenant benefitted from the increased production (Mao 1982, Kuo 1983). Second, the change in size of landholdings. Land reform led to a more equal land distribution and to a spread of small farming. The smaller size of farms contributed to the adoption of more labor-using crops and technologies. Third, the change in production patterns. Land reform led to crop diversification because new owner-cultivators were not under the obligation of cultivating rice anymore in order to make rental payments--the usual arrangement of tenants with their landlords.

VI. Summary and conclusions

The role of agriculture has been neglected by most interpretations of the East Asian success, and notably by the recent World Bank report The East Asian Miracle: Economic Growth and Public Policy. Based on a review of studies focused on the agricultural sector of a group of East Asian countries--Japan, Korea, and Taiwan--this paper addressed the role of agriculture in their successful transformation from rural and backward to industrialized and advanced economies. The information presented showed that in all three countries agriculture provided an elastic supply of labor to the industry during the early stages of industrialization. While in Korea foreign savings were the most important source of capital for industrialization, taxes to the agricultural sector comprised the largest proportion of resources that governments used to finance early industrialization in Japan and Taiwan. Also, agricultural exports generated a large part of the foreign exchange needed to import industrial machinery and technology.

While agriculture was taxed heavily, it received important attention from governments in the early stages of development. Because Taiwan and Korea were under Japanese colonial rule

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before the Second World War, the development of agriculture followed similar patterns than in Japan itself. Heavy investments were made in infrastructure, especially irrigation, and in the development and diffusion of seed-fertilizer technologies. Institutions for agricultural research and higher agricultural education were created, and rural elementary education was expanded dramatically. These policies led output and productivities in agriculture to grow at high rates for a long time. The growth in output and productivity was crucial to maintain food prices and the wage rate in the industrial sector low. In addition, the growth of agriculture and rural incomes promoted a whole range of industries that made or repaired tools used in agricultural production, provided inputs to production and consumer products to rural families.

Apart from investing in infrastructure and creating institutions of agricultural research and education, the state in Japan, Korea, and Taiwan implemented policies to stabilize the prices of agricultural products. Price stabilization not only benefitted consumers in urban areas, but also decreased the risks faced by agricultural producers. While in some cases the government monopolized the purchase of important crops, such as rice in Japan and Taiwan, and often paid farmers prices lower than the market price, it supported the price of other high value crops--mainly fruits and vegetables--favoring a shift in the crop structure towards products of high elasticity of demand with respect to income. Such a policy led to the rapid growth of an exporting processing industry.

Finally, all three countries implemented a land reform. Because it transferred land ownership from landlords to tenants who already managed operational units, land reform required neither organizational changes nor large investments to relocate beneficiaries. Former tenants had higher incentives to invest, which contributed to an increase in agricultural output and productivity. In addition, land reform had an enormous impact in the distribution of land ownership, and it led to a model of more equally distributed growth when the stage of rapid industrialization began. It generated a distribution characterized by small plots that favored the use of small-scale mechanization and the shift towards labor-intensive crops, which provided more possibilities of employment for the rural population. Such a pattern of equally distributed land ownership and of higher access to rural employment also facilitated the development of consumption and demand linkages with the local economy.

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