When economic growth is characterised by a slow rise in the demand for food and rapid growth in farm relative to non-farm productivity, it is understandable that agriculture in a closed economy declines in relative terms as that economy develops. But why should agriculture decline in virtually all open growing econ- omies as well, including those able to retain a comparative advantage in agricul- tural products? A key part of the answer is that the demand for non-tradable goods tends to be income elastic, so resources are diverted to their production even in open economies. One of the dominant changes that characterises a growing economy is the proportionate decline in the agricultural sector. This phenomenon is com- monly attributed to two facts: the slower rise in the demand for food as com- pared with other goods and services, and the rapid development of new farm technologies which lead to expanding food supplies per hectare and per worker
(Schultz, 1945; Kuznets, 1966; Johnson, 1973).

It is true that such conditions could lead to a relative decline of agriculture globally, or in a smaller closed economy. But why does agriculture decline in virtually all open growing economies? Might not some countries with rapid growth in agricultural relative to non-agricultural productivity improve their comparative advantage in agriculture sufficiently to prevent their agricultural sectors from declining in relative terms?

The relative decline of agriculture is clear from both cross-sectional and time-series data for the major country groupings shown in Table 1. The nega- tive relationships between agriculture’s shares of gross