IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_6426.html
   My bibliography  Save this paper

Wages, Human Capital, and Structural Transformation

Author

Listed:
  • Berthold Herrendorf
  • Todd Schoellman

Abstract

Average wages are considerably lower in agriculture than in the other sectors. We document this fact for thirteen countries ranging from rich (Canada, U.S.) to poor (India, Indonesia). We develop a measure of human capital that accounts for the selection of workers with different unobserved skills into sectors. We find that differences in human capital account for most of the wage gaps. We develop a model that rationalizes this finding and that allows us to quantify the distortions to the allocation of labor. We find that they are considerably smaller than typically claimed in the literature.

Suggested Citation

  • Berthold Herrendorf & Todd Schoellman, 2017. "Wages, Human Capital, and Structural Transformation," CESifo Working Paper Series 6426, CESifo.
    • Handle: RePEc:ces:ceswps:_6426
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6426.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tasso Adamopoulos & Diego Restuccia, 2014. "The Size Distribution of Farms and International Productivity Differences," American Economic Review, American Economic Association, vol. 104(6), pages 1667-1697, June.
    2. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    3. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    4. Dale W. Jorgenson & Marcel P. Timmer, 2011. "Structural Change in Advanced Nations: A New Set of Stylised Facts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 1-29, March.
    5. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    6. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    7. Shoshana Grossbard (ed.), 2006. "Jacob Mincer A Pioneer of Modern Labor Economics," Springer Books, Springer, number 978-0-387-29175-8, December.
    8. Berthold Herrendorf & Todd Schoellman, 2015. "Why is Measured Productivity so Low in Agriculture?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 1003-1022, October.
    9. Brigitte C. Madrian & Lars John Lefgren, 1999. "A Note on Longitudinally Matching Current Population Survey (CPS) Respondents," NBER Technical Working Papers 0247, National Bureau of Economic Research, Inc.
    10. Joan Hamory & Marieke Kleemans & Nicholas Y Li & Edward Miguel, 2021. "Reevaluating Agricultural Productivity Gaps with Longitudinal Microdata," Journal of the European Economic Association, European Economic Association, vol. 19(3), pages 1522-1555.
    11. Richard Rogerson, 2008. "Structural Transformation and the Deterioration of European Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 235-259, April.
    12. Thomas Lemieux, 2006. "The “Mincer Equation” Thirty Years After Schooling, Experience, and Earnings," Springer Books, in: Shoshana Grossbard (ed.), Jacob Mincer A Pioneer of Modern Labor Economics, chapter 11, pages 127-145, Springer.
    13. Timo Boppart, 2014. "Structural Change and the Kaldor Facts in a Growth Model With Relative Price Effects and Non‐Gorman Preferences," Econometrica, Econometric Society, vol. 82, pages 2167-2196, November.
    14. Kathleen Beegle & Joachim De Weerdt & Stefan Dercon, 2011. "Migration and Economic Mobility in Tanzania: Evidence from a Tracking Survey," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 1010-1033, August.
    15. Gueorgui Kambourov & Iourii Manovskii, 2008. "Rising Occupational And Industry Mobility In The United States: 1968-97," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 41-79, February.
    16. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
    17. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    18. Kuznets, Simon, 1973. "Modern Economic Growth: Findings and Reflections," American Economic Review, American Economic Association, vol. 63(3), pages 247-258, June.
    19. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
    20. Berthold Herrendorf & Richard Rogerson & ?kos Valentinyi, 2013. "Two Perspectives on Preferences and Structural Transformation," American Economic Review, American Economic Association, vol. 103(7), pages 2752-2789, December.
    21. Dale W. Jorgenson & Marcel P. Timmer, "undated". "Structural Change in Advanced Nations," Working Paper 13525, Harvard University OpenScholar.
    22. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
    23. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-452, May.
    24. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552, Elsevier.
    25. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 5266, London School of Economics and Political Science, LSE Library.
    26. Binelli Chiara, 2015. "How the wage-education profile got more convex: evidence from Mexico," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 509-560, July.
    27. Mr. Sergio Rebelo & Ms. Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    28. José Pulido & Tomasz Swiecki, 2019. "Barriers to Mobility or Sorting? Sources and Aggregate Implications of Income Gaps across Sectors and Locations in Indonesia," 2019 Meeting Papers 1298, Society for Economic Dynamics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    2. Xue, Jianpo & Yip, Chong K., 2018. "Home production, balanced-budget taxation and economic (in)stability," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 231-242.
    3. Douglas Gollin & Martina Kirchberger & David Lagakos, 2017. "In Search of a Spatial Equilibrium in the Developing World," NBER Working Papers 23916, National Bureau of Economic Research, Inc.
    4. David Lagakos & Ahmed Mushfiq Mobarak & Michael E. Waugh, 2023. "The Welfare Effects of Encouraging Rural–Urban Migration," Econometrica, Econometric Society, vol. 91(3), pages 803-837, May.
    5. Joan Hamory & Marieke Kleemans & Nicholas Y Li & Edward Miguel, 2021. "Reevaluating Agricultural Productivity Gaps with Longitudinal Microdata," Journal of the European Economic Association, European Economic Association, vol. 19(3), pages 1522-1555.
    6. Berthold Herrendorf & Christopher Herrington & Ákos Valentinyi, 2015. "Sectoral Technology and Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 104-133, October.
    7. Federico Rossi, 2019. "The Relative Efficiency of Skilled Labor across Countries: Measurement and Interpretation," 2019 Meeting Papers 829, Society for Economic Dynamics.
    8. Pedro Cavalcanti Ferreira & Alexander Monge-Naranjo & Luciene Torres de Mello Pereira, 2016. "Of Cities and Slums," Working Papers 2016-22, Federal Reserve Bank of St. Louis.
    9. Tomasz Swiecki, 2017. "Determinants of Structural Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 95-131, March.
    10. Duernecker, Georg & Herrendorf, Berthold, 2018. "On the allocation of time – A quantitative analysis of the roles of taxes and productivities," European Economic Review, Elsevier, vol. 102(C), pages 169-187.
    11. Berthold Herrendorf & Todd Schoellman, 2015. "Why is Measured Productivity so Low in Agriculture?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 1003-1022, October.
    12. Wenbiao Cai, 2016. "Risk, Selection and Productivity Differences," Departmental Working Papers 2016-02, The University of Winnipeg, Department of Economics.
    13. John Bailey Jones & Sangeeta Pratap, 2020. "An Estimated Structural Model of Entrepreneurial Behavior," American Economic Review, American Economic Association, vol. 110(9), pages 2859-2898, September.
    14. Porzio, T. & Santangelo, G., 2019. "Does Schooling Cause Structural Transformation?," Cambridge Working Papers in Economics 1925, Faculty of Economics, University of Cambridge.
    15. Todd Schoellman & Bart Hobijn, 2017. "Structural Transformation by Cohort," 2017 Meeting Papers 1417, Society for Economic Dynamics.
    16. Khalid El Fayoumi & Gregory Auclair, 2019. "The Role of Labor Market Frictions in Structural Transformation," Working Papers 1282, Economic Research Forum, revised 2019.
    17. Berthold Herrendorf & Todd Schoellman, 2018. "Wages, Human Capital, and Barriers to Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 1-23, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Berthold Herrendorf & Todd Schoellman, 2018. "Wages, Human Capital, and Barriers to Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 1-23, April.
    2. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    3. Margarida Duarte & Diego Restuccia, 2020. "Relative Prices and Sectoral Productivity," Journal of the European Economic Association, European Economic Association, vol. 18(3), pages 1400-1443.
    4. Barker, Tom & Üngör, Murat, 2019. "Vietnam: The next asian Tiger?," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 96-118.
    5. Todd Schoellman & Berthold Herrendorf, 2014. "Wages, Human Capital, and the Allocation of Labor across Sectors," 2014 Meeting Papers 364, Society for Economic Dynamics.
    6. Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    7. Murat Ungor, 2017. "Productivity Growth and Labor Reallocation: Latin America versus East Asia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 25-42, March.
    8. Mondal, Debasis, 2019. "Structural transformation and productivity growth in India during 1960–2010," Economic Modelling, Elsevier, vol. 82(C), pages 401-419.
    9. Federico Huneeus & Richard Rogerson, 2020. "Heterogeneous Paths of Industrialization," Working Papers 2020-23, Princeton University. Economics Department..
    10. Georg Duernecker & Berthold Herrendorf, 2022. "Structural Transformation of Occupation Employment," Economica, London School of Economics and Political Science, vol. 89(356), pages 789-814, October.
    11. Chen, Chaoran, 2020. "Technology adoption, capital deepening, and international productivity differences," Journal of Development Economics, Elsevier, vol. 143(C).
    12. Diego Comin & Danial Lashkari & Martí Mestieri, 2021. "Structural Change With Long‐Run Income and Price Effects," Econometrica, Econometric Society, vol. 89(1), pages 311-374, January.
    13. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
    14. Blanco, Cesar & Raurich, Xavier, 2022. "Agricultural composition and labor productivity," Journal of Development Economics, Elsevier, vol. 158(C).
    15. Arsham Reisinezhad, 2018. "Economic Growth and Income Inequality in Resource Countries: Theory and Evidence," PSE Working Papers halshs-01707976, HAL.
    16. Marti Mestieri & Danial Lashkari & Diego Comin, 2015. "Structural Transformations with Long-Run Price and Income Effects," 2015 Meeting Papers 437, Society for Economic Dynamics.
    17. Jonathan Temple & Ludger Wößmann, 2006. "Dualism and cross-country growth regressions," Journal of Economic Growth, Springer, vol. 11(3), pages 187-228, September.
    18. Gangopadhyay, Kausik & Mondal, Debasis, 2021. "Productivity, relative sectoral prices, and total factor productivity: Theory and evidence," Economic Modelling, Elsevier, vol. 100(C).
    19. Ye, Longfeng & Robertson, Peter E., 2019. "Hitting the Great Wall: Structural change and China's growth slowdown," China Economic Review, Elsevier, vol. 56(C), pages 1-1.
    20. Alistair Dieppe, 2021. "Global Productivity," World Bank Publications - Books, The World Bank Group, number 34015, December.

    More about this item

    Keywords

    human capital gaps; misallocation of labor; wage gaps;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_6426. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.