Selection, Agriculture and Cross-Country Productivity Differences

45 Pages Posted: 23 Jan 2012

See all articles by David Lagakos

David Lagakos

University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)

Michael E. Waugh

New York University (NYU), Leonard N. Stern School of Business, Department of Economics

Date Written: November 1, 2011

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 with preferences featuring a subsistence food requirement. In the model, subsistence requirements induce workers that are relatively unproductive at agriculture work to nonetheless select into the agriculture sector in poor countries. When parameterized, the model predicts that agriculture productivity differences are twice as large as those in non-agriculture even when economies differ by an economy-wide efficiency term that affects both sectors uniformly.

Keywords: selection, agriculture, Roy model, productivity, subsistence

JEL Classification: O11, O13, O41, J24

Suggested Citation

Lagakos, David and Waugh, Michael E., Selection, Agriculture and Cross-Country Productivity Differences (November 1, 2011). Available at SSRN: https://ssrn.com/abstract=1989679 or http://dx.doi.org/10.2139/ssrn.1989679

David Lagakos (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael E. Waugh

New York University (NYU), Leonard N. Stern School of Business, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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