From agriculture to manufacturing: How does geography matter?

This article advances a theory to show that geographical advantage for agricultural production helps an economy to become more prosperous in the predominantly agricultural regime, but delays the timing of transition to manufacturing production (i.e., the timing of industrialization). It also delays the change in labor structure toward an increase in proportion of skilled labor, and hence, the economy may be overtaken in the development process by another with less geographical advantage for agriculture. This theoretical result is in accordance with recent empirical evidence and helps explain the reversals of national fortune, which are documented in economic history. Within its analytical framework, the article also enriches the existing literature by explaining the decline in fertility and the evolution of labor structure, along with technological progress, in the development process.