Distribution of Agricultural Surplus and Industrial Takeoff

This paper analyses how the distribution of agricultural product between landlords and peasants affects both industrial takeoff and aggregate income through the demand side. Using a model that builds on Murphy et al. (1989), we find that the relationship between peasants' share of agricultural product and aggregate income is either non-monotonic or positive. This induces a relationship between aggregate income and the degree of inequality which is negative under industrialization but can be either positive or negative when industrialization is absent. We also prove that, in contrast with Murphy et al. (1989), in order for industrialization to take place a middle class of land- and firm-owners is not required: if peasants' share of agricultural product is large enough, then the buying power of workers of both agricultural and manufacturing sectors is sufficient to trigger industrialization