Working Paper: CEPR ID: DP10297
Authors: Jonathan Temple; Huikang Ying
Abstract: We examine whether structural transformation leads to a Kuznets curve. We present a dynamic general equilibrium model with heterogeneous workers, occupational self-selection and selective migration, and calibrate the model to survey data for Malawi. We show that structural transformation raises living standards unevenly. As development proceeds, the movement of workers from agriculture is associated with rising wage inequality, rather than a Kuznets curve. The increase in sectoral wage inequality is pronounced for agriculture. At the same time, structural transformation is associated with major reductions in rural poverty, and eventually in urban poverty.
Keywords: inequality; Kuznets curve; Roy model; structural transformation
JEL Codes: D31; O15; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| structural transformation (L16) | wage inequality (J31) |
| decrease in agricultural employment (J43) | increase in wage inequality (J31) |
| structural transformation (L16) | reduction in rural poverty (F63) |
| structural transformation (L16) | slower decline in urban poverty (R11) |
| movement of workers from agriculture (J43) | rising wage inequality (J31) |