The mechanism of agricultural development transmission on the economic growth and poverty reduction în the republic of Moldova

Abstract: Providing a qualitative economic growth by eliminating critical constraints and poverty reduction are short- term intended effects. For medium and long term, the fundamental concern of the authorities is to promote welfare - a concept that encompasses various aspects of development. The Republic of Moldova should make all efforts to ensure the transition towards green economic development that promotes the principles of sustainable rural development and contribute to poverty reduction, inclusively by ensuring better governance for sustainable development, by integrating and strengthening the aspects in agriculture and in all areas of the socio-economic development of the country.

Key words: agriculture, economic growth, poverty reduction.

INTRODUCTION

A diagnostic analysis of constraints to economic development highlights critical issues, i.e., areas where The Republic of Moldova is largely surpassed by comparable countries. According to the idea of general equilibrium agricultural demand leads towards industrialization (ADLI) [2]. Therefore, due to the ties of production and consumption, the development strategy of a country should be oriented towards agriculture (agriculture-driven development strategy) rather than to export-oriented strategy (export-driven development strategy) and the increased agrarian productivity should be the initiator of industrialization [3]. However, the approach of "agro-pessimism" is based on the observation that agriculture in developing countries could be the least productive sector of the economy. As a result, there is less need to increase agricultural productivity in order to induce global growth and poverty reduction. If agriculture is less productive than other sectors, import of food and focus on other sectors could be more beneficial for the development of a country.

MATERIALS AND METHODS

The used theoretical resources are the works specific to rural development. There also were used the data from the National Bureau of Statistics of the Republic of Moldova. In order to study the problem of sustainable rural development of the agricultural sector there were analyzed the data concerning the state of this branch, there were used such research methods as: the analysis, synthesis, comparison and more. There were used different regulations of the Ministry of Agriculture and Food Industry.

RESULTS AND DISCUSSIONS

Economic development, wherever it occurs, is based on three factors - the accumulation of capital, workforce and the degree of its productivity, which includes other parameters such as: technology, efficient governance, skills, etc. The analysis of the factors of economic development in the Republic of Moldova reveals a very alarming conclusion - without an effort to change the development paradigm, the growth potential for the next 10 years is limited to no more than 4.5-5% per year [5,7]. Agriculture is also an important factor of economic growth.

Further we are going to develop the concept of transmission mechanism for agriculture to identify how it can influence economic development and to establish priority strategies for the development of the agricultural units in the Republic of Moldova.

The transmission mechanism can be defined as system of functionally connected variables, that describe the mutual actions of the changes registered in the workforce, agricultural production, agricultural productivity, agricultural prices and export / import of agricultural products in the national economy ( economic growth, poverty reduction) [1]. Therefore, we will consider the mechanism of transmission as a hypothetical theoretical scheme concerning the channels through which the above mentioned variables act on macroeconomic variables.

We consider that the channels through which agriculture influences the development of the national economy in the case of a small closed economy are:

 workforce;

 agricultural production;

 productivity in agriculture;

 agricultural prices (Fig. 1).

I. The Channel of workforce. Productivity in agriculture is lower than in the industrial and services sector, the last two being considered to constitute the modern sector of a national economy.

While there is a surplus of labor in the agricultural sector, the productivity will be lower here. Consequently, in the modern sector wages will be higher, which causes the workforce to migrate from agriculture into modern sector, which, in its turn, generates economic growth.

Table 1. The employed population in the Republic of Moldova on types of economic activities