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14
Structural transformation and the rural-urban divide. Working paper
, 2012
"... Development of an economy typically goes hand-in-hand with a declining importance of agri-culture in output and employment. Given the primarily rural population in developing countries and their concentration in agrarian activities, this has potentially large implications for inequal-ity along the d ..."
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Development of an economy typically goes hand-in-hand with a declining importance of agri-culture in output and employment. Given the primarily rural population in developing countries and their concentration in agrarian activities, this has potentially large implications for inequal-ity along the development path. We examine the Indian experience between 1983 and 2010, a period when India has been undergoing such a transformation. We
nd a signi
cant decline in the wage di¤erences between individuals in rural and urban India during this period. However, individual characteristics such as education, occupation choices and migration account for at most 40 percent of the wage convergence. We use a two-sector model of structural transformation to rationalize the rest of the rural-urban convergence in India as the consequence of two factors: (i) di¤erential sectoral income elasticities of demand along with productivity growth; and (ii) higher labor supply growth in urban areas. Quantitative results suggest that the model can account for 70 percent of the unexplained wage convergence between rural and urban areas.
The efficiency of human capital allocations in developing countries.
- Journal of Development Economics.
, 2014
"... Abstract For a set of 14 developing countries I evaluate whether differences in the marginal product of human capital between sectors -estimated from individual-level wage data -have meaningful effects on aggregate productivity. Under the most generous assumptions regarding the homogeneity of human ..."
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Abstract For a set of 14 developing countries I evaluate whether differences in the marginal product of human capital between sectors -estimated from individual-level wage data -have meaningful effects on aggregate productivity. Under the most generous assumptions regarding the homogeneity of human capital, my analysis shows that equalizing the marginal product of human capital between sectors leads to gains in output of less than 5% for most countries. These estimated gains of reallocation represent an upper bound as some of the observed differences in marginal products between sectors are due to unmeasured human capital. Under reasonable assumptions on the amount of unmeasured human capital the gains from reallocation fall well below 3%. Compared to similar estimates made using data from the U.S., developing countries would gain more from a reallocation of human capital, but the differences are too small to account for a meaningful portion of the gap in income per capita with the United States. JEL Codes: O12, O15, O47, O57, J31
that full credit, including © notice, is given to the source.
, 2014
"... views expressed herein are those of the authors and do not necessarily reflect the views of the National ..."
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views expressed herein are those of the authors and do not necessarily reflect the views of the National
UB Economics Working Papers 2015/325
"... Labor mobility, structural change and economic growth Abstract: This paper develops a two-sector growth model in which the process of structural change in the sectoral composition of employment and GDP is jointly determined by non-homothetic preferences and labor mobility cost. This cost, paid by wo ..."
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Labor mobility, structural change and economic growth Abstract: This paper develops a two-sector growth model in which the process of structural change in the sectoral composition of employment and GDP is jointly determined by non-homothetic preferences and labor mobility cost. This cost, paid by workers moving to another sector, limits structural change. Our model can explain the following patterns of development of the US economy throughout the period 1880-2000: (i) balanced growth of the aggregate variables in the second half of the last century; (ii) structural change in the sectoral composition of employment between agriculture and non-agriculture sectors; (iii) structural change process in the sectoral composition of GDP between these sectors; and (iv) wage convergence between the two sectors. We outline that the last two patterns can only be explained if labor mobility cost is introduced. Results reveal that mobility cost generates a misallocation of production factors. This implies a loss of GDP which amounts to over 30 % of the GDP throughout initial periods according to the calibrated model. During the transition, the loss of GDP decreases and eventually vanishes. Thus, the elimination of the misallocation explains part of the increase in the GDP. Additionally, this study points out that misallocation introduces a mechanism through which cross-country differences in sectoral composition may account for cross-country income differences..
Agriculture and Structural Transformation in an Open Economy:
, 2012
"... Previous literature has shown that in poor countries with no access to interna-tional markets, low agricultural productivity implies that large fractions of the workforce must be employed in food production. Until a country can escape what Schultz (1953) termed “the food problem, ” it is difficult f ..."
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Previous literature has shown that in poor countries with no access to interna-tional markets, low agricultural productivity implies that large fractions of the workforce must be employed in food production. Until a country can escape what Schultz (1953) termed “the food problem, ” it is difficult for the economy to begin the process of releasing workers and productive resources to other sectors of the economy. This paper argues that, even in an open economy, the same dynamics can apply – and that low agricultural productivity can con-strain the process of structural transformation. The key insight is that domestic transport costs make it expensive to supply food to rural areas, implying that many rural people will remain engaged in subsistence food production even through their productivity is quite low. We use a multi-region multi-sector model, calibrated to data from Ghana, to argue that high domestic transporta-tion costs can reduce the benefits of openness. ⇤Authors ’
De-agriculturalization as a Result of Productivity Growth in Agriculture
"... Abstract This paper explores the secular decline in the employment share in agriculture as a result of productivity growth in the agricultural sector. I study an equation that states that employment share in agriculture is determined by the subsistence constraint and productivity in agriculture. Gi ..."
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Abstract This paper explores the secular decline in the employment share in agriculture as a result of productivity growth in the agricultural sector. I study an equation that states that employment share in agriculture is determined by the subsistence constraint and productivity in agriculture. Given the calibrated value for subsistence level of consumption in agriculture, labor productivity growth in this sector implies a share of employment in agriculture in the model that turns out to be very close to the data for a variety of countries between 1963 and 2005. JEL classification: N10, N50, O10, O50.
Structural Change in the Economy of Nigeria
, 2013
"... We document that structural change accounts for approximately one-fifth of the total change in labor productivity in Nigeria between 1996 and 2009. Labor moved out of the agricultural and wholesale and retail trade sectors into manufacturing, transportation and communications, business services, and ..."
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We document that structural change accounts for approximately one-fifth of the total change in labor productivity in Nigeria between 1996 and 2009. Labor moved out of the agricultural and wholesale and retail trade sectors into manufacturing, transportation and communications, business services, and general services. While structural change did occur in this period, significant gains to aggregate labor productivity are still available from further shifts of labor to higher-productivity sectors. We discuss the factors limiting structural change, which include poor agricultural productivity, insufficient infrastructure to support high productivity sectors, and a lack of appropriate skills in the labor force. We calculate that the gains still available to Nigeria from structural change are equivalent to an increase in value-added of 25 percent, given the existing productivity levels of sectors in 2009.
prepared under contract with Office of Trade and Labor Affairs
, 2011
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Seasonal Migration and Risk Aversion
, 2011
"... Pre-harvest lean seasons are widespread in the agrarian areas of Asia and Sub-Saharan Africa. Every year, these seasonal famines force millions of people to succumb to poverty and hunger. We randomly assign an $8.50 incentive to households in Bangladesh to out-migrate during the lean season, and doc ..."
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Pre-harvest lean seasons are widespread in the agrarian areas of Asia and Sub-Saharan Africa. Every year, these seasonal famines force millions of people to succumb to poverty and hunger. We randomly assign an $8.50 incentive to households in Bangladesh to out-migrate during the lean season, and document a set of striking facts. The incentive induces 22 % of households to send a seasonal migrant, consumption at the origin increases by 30 % (550-700 calories per person per day) for the family members of induced migrants, and follow-up data show that treated households continue to re-migrate at a higher rate after the incentive is removed. The migration rate is 10 percentage points higher in treatment areas a year later, and three years later it is still 8 percentage points higher. These facts can be explained by a model with three key elements: (a) experimenting with the new activity is risky, given uncertain prospects at the destination, (b) overcoming the risk requires individual-specific learning (e.g. resolving the uncertainty about matching to an employer), and (c) some migrants are close to subsistence and the risk of failure is very costly. We test a model with these features by examining heterogeneity in take-up and re-migration, and by conducting a new experiment with a
