Structural Transformation and the Agricultural Wage Gap

Abstract

A key feature of developing economies is that wages in agriculture are significantlybelow those of other sectors. Using Brazilian household surveys and administrativepanel data, I use information on workers who switch sectors to decompose the driversof 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 reallocatingworkers out of agriculture and favors recently proposed Roy models of inter-sectorsorting. A calibrated sorting model of structural transformation can account for thewage gap level observed and its decline as the economy transitioned out of agriculture.

Keywords: Western Hemisphere, Brazil, Agriculture, Human capital, Wage Gaps, Structural Transformation, Sorting, Productivity Gaps, Labor Force and Employment, Size, and Structure, Agricultural Labor Markets, Occupational and Intergenerational Mobility, General, General

JEL Classification: J21, J31, J43, J62, Q10, R10, J24