On why and how agriculture declines

This article proposes an empirical model to investigate the long-run decline of the agricultural sector during economic growth. Within a two-sector representation of open regional economies, agricultural decline eventually results from the interaction of few underlying driving forces acting on both the supply and demand sides of the economy. From this theoretical framework an estimable simultaneous equation model is specified as a panel SVAR model. Identification and estimation are performed according to the theoretical restrictions. The application concerns the Italian regions over the period 1952–2002. Estimation results highlight the relevance of the different driving forces as well as their interplay in shaping agricultural decline.