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Structural Change out of Agriculture: Labor Push versus Labor Pull

  • Alvarez-Cuadrado, Francisco


    (McGill University)

  • Poschke, Markus


    (McGill University)

The process of economic development is characterized by substantial rural-urban migrations and a decreasing share of agriculture in output and employment. The literature highlights two main engines behind this process of structural change: (i) improvements in agricultural technology combined with the effect of Engel's law of demand push resources out of the agricultural sector (the "labor push" hypothesis), and (ii) improvements in industrial technology attract labor into this sector (the "labor pull" hypothesis). We present a simple model that features both channels and use it to explore their relative importance. We evaluate the U.S. time series since 1800 and a sample of 13 industrialized countries starting in the 19th century. Our results suggest that, on average, the "labor pull" channel dominates. This contrasts with popular modeling choices in the recent literature.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4247.

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Length: 32 pages
Date of creation: Jun 2009
Date of revision:
Publication status: published in: American Economic Journal: Macroeconomics, 2011, 3 (3), 127-158
Handle: RePEc:iza:izadps:dp4247
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  1. 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.
  2. 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.
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  4. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
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  6. Fumio Hayashi & Edward C. Prescott, 2006. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," NBER Working Papers 12081, National Bureau of Economic Research, Inc.
  7. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
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  9. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, December.
  10. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
  11. 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.
  12. Mathan Satchi & Jonathan Temple, 2008. "Labour Markets and Productivity in Developing Countries," Studies in Economics 0805, School of Economics, University of Kent.
  13. 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.
  14. Olmstead, Alan L. & Rhode, Paul W., 2001. "Reshaping The Landscape: The Impact And Diffusion Of The Tractor In American Agriculture, 1910 1960," The Journal of Economic History, Cambridge University Press, vol. 61(03), pages 663-698, September.
  15. Smits, J.-P. & Woltjer, P. & Ma, D., 2009. "A Dataset on Comparative Historical National Accounts, ca.1870-1950: A Time-Series Perspective," GGDC Research Memorandum GD-107, Groningen Growth and Development Centre, University of Groningen.
  16. 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.
  17. repec:oup:qjecon:v:106:y:1991:i:2:p:651-67 is not listed on IDEAS
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