Structural Transformation and Spatial Convergence Across Countries

I document how the importance of structural transformation for spatial convergence of labor income varies across countries. I use microdata to show that in recent decades structural change accounts for a much larger share of income convergence in developing countries than in rich countries. Convergence in sectoral composition of employment accounts for most of the contribution of structural change. Using a quantitative general equilibrium model, I find that the increase in educational attainment has been a key determinant of income convergence in developing countries. The results of the model imply that unbalanced productivity growth in agriculture is mostly relevant for convergence in sectoral composition of employment, but not for income convergence.