American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Selection, Agriculture, and Cross-Country Productivity Differences
American Economic Review
vol. 103,
no. 2, April 2013
(pp. 948–80)
Abstract
Cross-country labor productivity differences are larger in agriculture than in non-agriculture. We propose a new explanation for these patterns in which the self-selection of heterogeneous workers determines sector productivity. We formalize our theory in a general-equilibrium Roy model in which preferences feature a subsistence food requirement. In the model, subsistence requirements induce workers that are relatively unproductive at agricultural work to nonetheless select into the agriculture sector in poor countries. When parameterized, the model predicts that productivity differences are roughly twice as large in agriculture as non-agriculture even when countries differ by an economy-wide efficiency term that affects both sectors uniformly. (JEL J24, J31, J43, O11, O13, O40)Citation
Lagakos, David, and Michael E. Waugh. 2013. "Selection, Agriculture, and Cross-Country Productivity Differences." American Economic Review, 103 (2): 948–80. DOI: 10.1257/aer.103.2.948Additional Materials
JEL Classification
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J43 Agricultural Labor Markets
- O11 Macroeconomic Analyses of Economic Development
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- O40 Economic Growth and Aggregate Productivity: General