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Countries in the Organization for Economic Cooperation and Development (OECD) have policies in place that affect the prices of agricultural goods and inputs. Agricultural policy interventions raise important questions about their impact on the sector. What is the long-term effect on agriculture of changes in incentives to develop and adopt new technology? What are the shorter-term allocative effects of these changes? Furthermore, is the technological effect as important as the allocative effects, to which economists have paid more attention? For instance, Mellor and Johnston,(1984, p. 558) have suggested that" the indirect, long-term effects of price distortions on the orientation of research and the bias of technical change may well be more important than their adverse effects on short-run allocative efficiency." Understanding the extent to which technological change has contributed to structural change, and how economic policy in the OECD nations has influenced technological change, is of central concern to those who want to use economic policy to reform the structural characteristics of developing economies.

Structural change in agriculture implies a shift in the farm population from agriculture to the industrial or services sector. This change in the occupational profile of the work force can boost economic growth, raise incomes, and reduce rural poverty. But problems usually arise from the slow rate of adjustment and from the incidence of the costs of change. Hence, structural change has been at the heart of agricultural policy in most OECD countries. In some cases, it has been referred to as the" farm problem"—" a problem of low and unstable …