The Extent of the Market and Stages of Agricultural Specialization

This paper provides empirical evidence
of nonlinearity in the relationship between crop
specialization in a village economy and the extent of the
market (size of the urban market) relevant for the village.
The results suggest that the portfolio of crops in a village
economy becomes more diversified initially as the extent of
the market increases. However, after the market size reaches
a threshold, the production structure becomes specialized
again. This evidence on the stages of agricultural
diversification is consistent with the stages of
diversification identified in the recent literature for the
economy as a whole and also for the manufacturing sector.
The evidence highlights the importance of improving
farmers' access to markets through investment in
transport infrastructure and removal of barriers to trading.