Agricultural Growth, Political Legitimacy, and Outward-Oriented Growth

Abstract This paper develops a model in which the ability to raise tax revenue is of crucial importance to the state. Most poor countries rely upon the shifting of resources from hard- to easy-to-tax sectors and the policies utilized have generally been characterized as import substitution industrialization. A shift to outward-oriented growth depends on a process by which a larger proportion of the economy becomes formalized. Broad-based agricultural growth is a mechanism by which this will occur allowing for tax reform and a shift in economic policy. Taiwan and the Philippines are examples of success and failure.