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Structural Change Out Of Agriculture: Labor Push Versus Labor Pull

  • Francisco Alvarez-Cuadrado


  • Markus Poschke


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 to popular modeling choices in the recent literature.

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Paper provided by McGill University, Department of Economics in its series Departmental Working Papers with number 2009-08.

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Length: 30 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:mcl:mclwop:2009-08
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  1. L. Rachel Ngai & Christopher Pissarides, 2004. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 3550, London School of Economics and Political Science, LSE Library.
  2. 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.
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  4. 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.
  5. Alvarez-Cuadrado, Francisco & Poschke, Markus, 2009. "Structural Change out of Agriculture: Labor Push versus Labor Pull," IZA Discussion Papers 4247, Institute for the Study of Labor (IZA).
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  10. 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.
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  13. 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.
  14. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Mathan Satchi & Jonathan Temple, 2008. "Labour Markets and Productivity in Developing Countries," Studies in Economics 0805, School of Economics, University of Kent.
  16. 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.
  17. 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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