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Selection, Agriculture, and Cross-Country Productivity Differences

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  • David Lagakos
  • Michael E. Waugh

Abstract

Cross-country labor productivity differences are larger in agriculture than in non-agriculture. We propose a new explanation for these patterns in which the self-selection of heterogeneous workers determines sector productivity. We formalize our theory in a general-equilibrium Roy model in which preferences feature a subsistence food requirement. In the model, subsistence requirements induce workers that are relatively unproductive at agricultural work to nonetheless select into the agriculture sector in poor countries. When parameterized, the model predicts that productivity differences are roughly twice as large in agriculture as non-agriculture even when countries differ by an economy-wide efficiency term that affects both sectors uniformly. (JEL J24, J31, J43, O11, O13, O40)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 2 (April)
Pages: 948-80

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:2:p:948-80

Note: DOI: 10.1257/aer.103.2.948
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  1. Defining Development Economics
    by dvollrath in The Growth Economics Blog on 2014-04-18 20:49:15
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  1. Selection, Agriculture, and Cross-Country Productivity Differences (AER 2013) in ReplicationWiki

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