Structural transformation of the economy of a mountainous region with agricultural specialization

We study the problem of structural transformation of the economy of a mountainous region with agrarian specialization. Technological changes, reflected by production functions of the regional industry of specialization lead to an adaptation of the employment structure and, as a result, the structure of output in the economy of an open region in the medium term. For small mountainous regions with a traditional sectoral economic system structure, the choice of the path of regional development largely depends on the chosen trajectory for stimulating structural changes. We have presented a model of the influence of technological changes in the agricultural production industry on structural changes in the economy of a mountainous agrarian region in the medium term with the classification of technological innovations into three types - land-saving, labor-saving and neutral. The model is a two-factor model of an aggregated production function in a small open regional economy and describes the influence of technological change on the transformation of the sectoral structure. The region in the model is a small open agrarian economy with immobile factors of production. The conditions of equilibrium in statics are considered and analyzed. We show that the introduction of landsaving or neutral concerning the balance of returns from production factors of technological innovations, an increase in agricultural productivity causes a decrease in industry share as labor flows into agriculture. The proposition is substantiated that if land and labor as factors of production are strong complements, labor-saving technological changes in agriculture lead to an outflow of labor from the agricultural sector. It is shown how the proposed model helps to make a strategic choice of the program of technological re-equipment of the industry of specialization of a small region with an open economy.