Agricultural productivity and rural-urban wage gaps revisited: Lessons from panel data

Cities don’t make workers (much) more productive, but productive workers move to cities.

While important advancements in our understanding of productivity gaps between agricultural and non-agricultural workers – as well as between rural and urban areas – these analyses compare different workers in different sectors in a cross-sectional setting. As such, they may still reflect unobserved differences that have nothing to do with how efficiently developing country labour markets are putting workers in the right jobs. In our study (Hamory Hicks et al. 2018), we aim to improve on this work by using rich longitudinal survey data that track individuals during 28 years in Indonesia and 17 years in Kenya. This allows us to observe the same individual in both sectors and compare their earnings, while correcting for selection into migration, and study how much of the agricultural productivity gaps remains.