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Joan Hamory, Marieke Kleemans, Nicholas Y Li, Edward Miguel, Reevaluating Agricultural Productivity Gaps with Longitudinal Microdata, Journal of the European Economic Association, Volume 19, Issue 3, June 2021, Pages 1522–1555, https://doi.org/10.1093/jeea/jvaa043
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Abstract
Recent research has pointed to large gaps in labor productivity between the agricultural and non-agricultural sectors in low-income countries, as well as between workers in rural and urban areas. Most estimates are based on national accounts or repeated cross-sections of microsurvey data, and as a result typically struggle to account for individual selection between sectors. This paper uses long-run individual-level panel data from two low-income countries (Indonesia and Kenya) to explore these gaps. Accounting for individual fixed effects leads to much smaller estimated productivity gains from moving into the non-agricultural sector (or urban areas), reducing estimated gaps by roughly 67%–92%. Furthermore, gaps do not emerge up to 5 years after a move between sectors. We evaluate whether these findings imply a re-assessment of the conventional wisdom regarding sectoral gaps, discuss how to reconcile them with existing cross-sectional estimates, and consider implications for the desirability of sectoral reallocation of labor.
