Markus Eberhardt (University of Nottingham)

"Agricultural Technology and Structural Change" (with Dietrich Vollrath)

Abstract: Using data for 128 countries we document low (high) elasticities of agricultural output with respect to labor in economies within temperate (tropical/highland) climate zones. Adopting a standard model of structural change we show that this technology heterogeneity determines the speed of structural transformation following changes in agricultural productivity and population size. Calibration exercises document shifts in sectoral labor allocation and living standards 2-3 times larger in temperate than in otherwise identical equatorial/highland regions for a given productivity shock. Eliminating technology heterogeneity can account for one-fifth of the observed differences in aggregate income per capita across countries.