The Agricultural Wage Gap: Evidence from Brazilian Micro-Data

Abstract

A key feature of developing economies is that wages in agriculture are significantly below those of other sectors. Using Brazilian household surveys and administrative panel data, I use information on workers who switch sectors to decompose this gap. I find that most of the gap is explained by differences in worker composition. The evidence speaks against the existence of large short-term gains from reallocating workers out of agriculture and favors recently proposed Roy models of inter-sector sorting. A calibrated sorting model can account for the wage gap level observed and its decline as the economy transitioned out of agriculture.

Keywords: Wage Gaps, Agriculture, Structural Transformation, Human Capital, Sorting, Productivity Gaps, Brazil.

JEL Classification: E24, J31, J43, J61, O11, O13, O18, O41