Job Market Paper:
“Paths Out of Agriculture: Structural Change, Self-Employment, and Productivity Growth” — Link
Abstract: Poor countries concentrate labor in agriculture, while rich countries concentrate labor in non-agriculture. However, higher non-agricultural employment does not guarantee higher income, as there is still substantial variation in GDP per capita at every level of non-agricultural employment. This paper examines how the paths out of agriculture— “agricultural push” (due to agricultural productivity growth) versus “non-agricultural pull” (due to non-agricultural productivity growth)—shape the patterns of self-employment and income growth in the process of structural change. For a cross-section of countries and South Korean time series, I find that the “push” effect is positively associated with the growth of non-agricultural self-employment, which is, in turn, associated with a lower per-capita GDP growth. By contrast, the “pull” effect shows the opposite pattern: it is associated with lower growth of self-employment in non-agriculture and higher GDP growth. I develop a theoretical model and calibrate it to Korean data between 1970 and 2015. Counterfactual analysis shows that agricultural and non-agricultural productivity growth produce distinct effects on employment and productivity growth—for example, GDP per capita growth would have been 60% higher in the “pull-only” scenario than that in the “push-only” scenario from 1970 to 2015, highlighting the need to distinguish between the different drivers of structural change.