Policy Brief

Modelling Structural Transformation when Nature Matters

Christopher B. Barrett, Ariel Ortiz-Bobea, and Trinh Pham

Man planting seeds

Contemporary development policy for low-income agrarian nations rests heavily on old structural transformation models that ignore how nature can impact agriculture and other sectors, and vice versa. Direct efforts should be made to incorporate these feedback effects between environmental and economic outcomes into theories of structural transformation. This affects a number of important policy areas. Agricultural R&D policy must increasingly recognise the need for a reorientation towards adaptation in the face of climate change. Incorporating capital and technology into agricultural production becomes increasingly important once we recognise the costs of expanding into virgin land. The value of rural infrastructure policies changes when including the environmental impacts that these investments may have. This policy brief discusses policies and investment strategies incorporating bidirectional linkages with the natural environment that could lead to a green rural transformation.

This policy brief is based off the pathfinding paper, Structural Transformation, Agriculture, Climate, and the Environment, written by Christopher B. Barrett, Ariel Ortiz-Bobea, Trinh Pham, a revised version of which is forthcoming in the Review of Environmental Economics and Policy.

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