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Selection and Absolute Advantage in Farming and Entrepreneurship

Author

Listed:
  • Alvarez-Cuadrado, Francisco

    (McGill University)

  • Amodio, Francesco

    (McGill University)

  • Poschke, Markus

    (McGill University)

Abstract

Output per worker is lower in poor countries than in rich countries, and relatively more so in the agricultural sector. Sorting of heterogeneous workers can contribute to explain this fact if comparative and absolute advantage are aligned in agriculture, implying that average productivity in agriculture increases as the agricultural employment share decreases. We empirically investigate the correlation between comparative and absolute advantage using representative household-level panel data from four Sub-Saharan African countries. Around one third of households engage in both agriculture and non-farming entrepreneurship. We find that more productive farming households are more likely to also engage in non-farm entrepreneurship, allocate more hours to it if they do, and are more likely to enter it if not yet active. All three pieces of evidence imply that comparative and absolute advantage are negatively correlated – misaligned – in agriculture, casting doubt on the importance of selection as a root cause of the agricultural productivity gap.

Suggested Citation

  • Alvarez-Cuadrado, Francisco & Amodio, Francesco & Poschke, Markus, 2019. "Selection and Absolute Advantage in Farming and Entrepreneurship," IZA Discussion Papers 12878, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12878
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    References listed on IDEAS

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    Cited by:

    1. Boyan Jovanovic, 2019. "The entrepreneurship premium," Small Business Economics, Springer, vol. 53(3), pages 555-568, October.
    2. Cassan, Guilhem & Keniston, Daniel & Kleineberg, Tatjana, 2021. "A Division of Laborers: Identity and Efficiency in India," CEPR Discussion Papers 15778, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    agricultural productivity gap; selection; entrepreneurship; Africa;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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