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Structural Change Out of Agriculture: Labor Push versus Labor Pull

  • Francisco Alvarez-Cuadrado
  • Markus Poschke

A declining agricultural employment share is a key feature of economic development. Its main drivers are: improvements in agricultural technology combined with Engel's law release resources from agriculture ("labor push"), and improvements in industrial technology attract labor out of agriculture ("labor pull"). We present a model with both channels and evaluate the importance using data on 12 industrialized countries since the nineteenth century. Results suggest that the "pull" channel dominated until 1920 and the "push" channel dominated after 1960. The "pull" channel mattered more in countries in early stages of the structural transformation. This contrasts with modeling choices in recent literature. (JEL E23, N10, N53, O10, O47).

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Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 3 (2011)
Issue (Month): 3 (July)
Pages: 127-58

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Handle: RePEc:aea:aejmac:v:3:y:2011:i:3:p:127-58
Note: DOI: 10.1257/mac.3.3.127
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  1. Fumio Hayashi & Edward C. Prescott, 2008. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 573-632, 08.
  2. Mathan Satchi & Jonathan Temple, 2009. "Labor Markets and Productivity in Developing Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 183-204, January.
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  5. Francisco Alvarez-Cuadrado & Markus Poschke, 2011. "Structural Change Out of Agriculture: Labor Push versus Labor Pull," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 127-58, July.
  6. Magnac, Thierry & Postel-Vinay, Gilles, 1997. "Wage Competition between Agriculture and Industry in Mid-Nineteenth Century France," Explorations in Economic History, Elsevier, vol. 34(1), pages 1-26, January.
  7. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  8. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  9. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
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  12. Benjamin N. Dennis & Talan Iscan, 2007. "Accounting for Structural Change: Evidence from Two Centuries of U.S. Data," Department of Economics at Dalhousie University working papers archive account7, Dalhousie, Department of Economics.
  13. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Kiminori Matsuyama, 2009. "Structural Change in an Interdependent World: A Global View of Manufacturing Decline," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 478-486, 04-05.
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