Structural Transformation and the Agricultural Wage Gap

Author/Editor:

Jorge Alvarez

Publication Date:

December 22, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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 the drivers of 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 of structural transformation can account for the wage gap level observed and its decline as the economy transitioned out of agriculture.

Series:

Working Paper No. 17/289

Subject:

English

Publication Date:

December 22, 2017

ISBN/ISSN:

9781484335444/1018-5941

Stock No:

WPIEA2017289

Format:

Paper

Pages:

53

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