Structural Change Out of Agriculture: Labor Push Versus Labor Pull

By Francisco Álvarez-Cuadrado, Markus Poschke. Social Science Research Network, 2011

289 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/5ad907135c3333ad8ae837d558b8ca1a21c8c252

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In Economics and Econometrics

Citations in the corpus

Growth and Structural Transformation (2013, background): “Indeed, Alvarez-Cuadrado et al. (2012) have recently pointed out that the relative price of sectoral output depends not only on sectoral TFP and capital intensity, but also on the elasticity of substitution between capital and labor.”
Urbanization with and without industrialization (2015, background): “If the country experiences an Industrial Revolution, the urban wage increases, which attracts workers from the countryside (Alvarez-Cuadrado and Poschke 2011).”