The Agricultural Exodus in the Philippines: Are Wage Differentials Driving the Process?

IMF Working Papers, August 20, 2021

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Lagging labor reallocations outside agriculture amid sustained low agricultural productivity have been a key feature in the Philippines over the past 15 years.
An analysis of labor adjustments in and out of agriculture shows a variety of factors have influenced the process.
Factors largely associated with growing outflows of labor from agriculture:
- Widening of wage differentials with non-agricultural sectors.
- Improvements in labor market efficiency.
- Better transport infrastructure.
Factors that hinder outflows of labor from agriculture:
- Lack of post-primary education.
- Presence of agricultural clusters.
The results contrast with the traditional view that agricultural employment outflows are largely driven by productivity differences and wage differentials; the study emphasizes the roles of education and transport infrastructure in facilitating labor reallocations from agriculture to non-agriculture.

Addressing education gaps, particularly post-primary education, is likely important to facilitate labor reallocations from agriculture to non-agriculture.
Improving transport infrastructure can be an effective channel to support labor mobility out of agriculture.
Policies that enhance labor market efficiency may accelerate transitions of workers from agriculture to higher-productivity non-agricultural sectors.
Attention to agricultural clusters is needed to understand and mitigate localized impediments to labor outflows.

Subject: Agricultural sector, Economic sectors, Education, Employment, Labor, Labor markets, Real wages
Keywords: Agricultural sector, agriculture performance, efficiency index, Employment, Global, job separation, labor adjustment, Labor markets, real wage wage differential, Real wages, time series trend