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Structural Change out of Agriculture: Labor Push versus Labor Pull

Author

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  • Alvarez-Cuadrado, Francisco

    (McGill University)

  • Poschke, Markus

    (McGill University)

Abstract

The process of economic development is characterized by substantial rural-urban migrations and a decreasing share of agriculture in output and employment. The literature highlights two main engines behind this process of structural change: (i) improvements in agricultural technology combined with the effect of Engel's law of demand push resources out of the agricultural sector (the "labor push" hypothesis), and (ii) improvements in industrial technology attract labor into this sector (the "labor pull" hypothesis). We present a simple model that features both channels and use it to explore their relative importance. We evaluate the U.S. time series since 1800 and a sample of 13 industrialized countries starting in the 19th century. Our results suggest that, on average, the "labor pull" channel dominates. This contrasts with popular modeling choices in the recent literature.

Suggested Citation

  • Alvarez-Cuadrado, Francisco & Poschke, Markus, 2009. "Structural Change out of Agriculture: Labor Push versus Labor Pull," IZA Discussion Papers 4247, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4247
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    More about this item

    Keywords

    structural change; growth;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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