This paper examines how market mechanisms and price adjustments influenced structural transformation during the Green Revolution.
This paper explores the role of market mechanisms and price adjustments in structural transformation and economic development, focusing on the Green Revolution. Using theoretical insights on equilibrium market prices, we employ shift-share (Bartik) instrumental variables to address endogeneity in relative prices. Empirical results show that while the Green Revolution enhanced agricultural productivity, lowered crop prices, and shifted labor to non-agriculture, market imperfections and price distortions exacerbated misallocation—measured by the Price-Based Misallocation (PBM) index—diminishing its overall benefits. Realizing the Green Revolution’s full potential requires well-functioning market mechanisms, highlighting the need for institutional reforms and targeted policies to correct inefficiencies and optimize agricultural innovation gains.
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