This paper shows, in a two-sector growth model with endogenous fertility, that long-run output per capita and industrialization depend upon the labor elasticity of agricultural production. A high labor elasticity, because the diminishing returns to labor are less pronounced, leads to a larger population density, lower output per capita, and a larger share of labor in agriculture in steady state. In response to an increase in industrial productivity, a higher labor elasticity in agriculture reduces the increase in output per capita. Cross-country estimates of agricultural production functions confirm that there is substantial variation in this elasticity across different climate zones and crop types. Consistent with relative development levels prior to the Industrial Revolution, regions in the tropics and/or with distinct dry seasons are found to have higher labor elasticities. The results suggest that the type of agriculture practiced can provide an important explanation for relative development levels in both contemporary and historical contexts.