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Title: Spatial Structural Change and Agricultural Productivity

Citation Type: Miscellaneous

Publication Year: 2017

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Abstract: Standard models of structural change predict that the share of agricultural value added and agricultural employment are equalized. In the data they are not. While both decline as the economy develops, value added per worker in agriculture is substantially lower than in non-agriculture. Moreover, this agricultural productivity gap is remarkably persistent despite the large reallocation of production factors across sectors. In this paper, we argue that this sectoral productivity gap might to a large extent be a spatial gap. Using a novel dataset for more than 700 US commuting zones between 1880 and 2000, we document that agricultural employment shares are strongly negatively correlated with average earnings and uncorrelated with subsequent net population outflows. These facts are consistent of substantive frictions to spatial mobility, which prevent the spatial equalization of marginal products. To quantify the strength of this mechanism, we construct a novel theory of spatial structural change by embedding an economic geography model in a dynamic, neoclassical model of the structural transformation. We show that spatial frictions can account for more than 50% of the observed productivity gap. This implies that the direct productivity gains from reallocating workers across sectors are modest.

Url: http://econweb.umd.edu/~davis/eventpapers./PetersChange.pdf

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Authors: Eckert, Fabian; Peters, Michael

Publisher: Yale University and NBER

Data Collections: IPUMS USA

Topics: Land Use/Urban Organization

Countries: United States