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Structural Change and the Supply of Agricultural Workers

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  • Porzio, Tommaso
  • Santangelo, Gabriella

Abstract

What explains labor reallocation out of agriculture? We show that decreases in the supply of agricultural workers, due to younger birth-cohorts having skills which are more valued out of agriculture, play a major, and previously overlooked, role. First, we use micro data from 52 countries to decompose aggregate labor reallocation into year and cohort effects. Cohort effects accounts for more than half of overall reallocation. Then, we develop an overlapping generations model to provide an analytical and parsimonious map from the statistical objects, year and cohort effects, into the structural objects of interest, demand and supply of agricultural workers. The map is modulated by mobility frictions and general equilibrium, which we discipline with micro data. Filtering the data through the model, we conclude that decreases in the supply of agricultural workers account for a sizable fraction, approximately one third, of labor reallocation. Finally, we show that, both within and across countries, larger increases in schooling across cohorts are correlated with faster reallocation out of agriculture, suggesting that human capital determines the supply of agricultural workers. We provide further, and causal, evidence on the role of human capital by showing that a school construction program in Indonesia led to labor reallocation out of agriculture.

Suggested Citation

  • Porzio, Tommaso & Santangelo, Gabriella, 2017. "Structural Change and the Supply of Agricultural Workers," CEPR Discussion Papers 12495, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12495
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    References listed on IDEAS

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    Cited by:

    1. Ying Feng & David Lagakos & James E. Rauch, 2018. "Unemployment and Development," NBER Working Papers 25171, National Bureau of Economic Research, Inc.
    2. Fabian Eckert & Michael Peters, 2018. "Spatial Structural Change," 2018 Meeting Papers 98, Society for Economic Dynamics.

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