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

Rich countries are industrial, poor countries are agricultural

This simple observation intrigued early scholars, and prompted the conclusion that the key to economic development is the transition of economies out of agriculture and into ‘modern’ sectors. More recently, the question of whether there is ‘too much’ labour in agriculture in poor countries has seen renewed focus. In particular, Restuccia et al. (2008) observe that while agricultural workers have lower measured productivity than non-agricultural workers in all countries, this ‘agricultural productivity gap’ is many times larger in the poorest of countries. As a result, these countries face a double disadvantage where…