Structural Change and the Supply of Agricultural Workers

64 Pages Posted: 19 Dec 2017

See all articles by Tommaso Porzio

Tommaso Porzio

Yale University

Gabriella Santangelo

affiliation not provided to SSRN

Date Written: December 2017

Abstract

What explains labor reallocation out of agriculture? We show that decreases in the supply of agricultural workers, due to younger birth-cohorts having skills which are more valued out of agriculture, play a major, and previously overlooked, role. First, we use micro data from 52 countries to decompose aggregate labor reallocation into year and cohort effects. Cohort effects accounts for more than half of overall reallocation. Then, we develop an overlapping generations model to provide an analytical and parsimonious map from the statistical objects, year and cohort effects, into the structural objects of interest, demand and supply of agricultural workers. The map is modulated by mobility frictions and general equilibrium, which we discipline with micro data. Filtering the data through the model, we conclude that decreases in the supply of agricultural workers account for a sizable fraction, approximately one third, of labor reallocation. Finally, we show that, both within and across countries, larger increases in schooling across cohorts are correlated with faster reallocation out of agriculture, suggesting that human capital determines the supply of agricultural workers. We provide further, and causal, evidence on the role of human capital by showing that a school construction program in Indonesia led to labor reallocation out of agriculture.

Suggested Citation

Porzio, Tommaso and Santangelo, Gabriella, Structural Change and the Supply of Agricultural Workers (December 2017). CEPR Discussion Paper No. DP12495, Available at SSRN: https://ssrn.com/abstract=3089710

Tommaso Porzio (Contact Author)

Yale University ( email )

New Haven, CT 06520
United States

Gabriella Santangelo

affiliation not provided to SSRN

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