Agricultural productivity and the sectoral reallocation of labor in rural India

How do shocks to agricultural productivity affect the allocation of labor across sectors of the economy? To answer this, I use data from rural India to show that exogenous increases in agricultural productivity — caused by abnormally high levels of precipitation — lead to an increase in the labor sh...

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Bibliographic Details
Published in:Journal of development economics Vol. 135; pp. 488 - 503
Main Author: Emerick, Kyle
Format: Journal Article
Language:English
Published: Elsevier B.V 01.11.2018
Subjects:
Agricultural productivity
Labor allocation
O13
J43
Q10
Agricultural productivity
Labor allocation
ISSN:0304-3878, 1872-6089
Online Access:Get full text
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Summary:How do shocks to agricultural productivity affect the allocation of labor across sectors of the economy? To answer this, I use data from rural India to show that exogenous increases in agricultural productivity — caused by abnormally high levels of precipitation — lead to an increase in the labor share of the non-agricultural sector. I further show that the non-tradable sector expands significantly when agricultural output increases. This evidence is consistent with increasing agricultural output causing increased demand for local non-tradables, which in turn increases the non-agricultural labor share. •Short-term increases in agricultural productivity in India cause labor to shift to the non-agricultural sector.•Consistent with local demand effects, local non-tradable sectors absorb much of the labor that leaves agriculture.•The effects are largest for more educated and higher caste households.
ISSN:0304-3878
1872-6089
DOI:10.1016/j.jdeveco.2018.08.013