Working Paper: CEPR ID: DP14269
Authors: Francisco Alvarez-Cuadrado; Francesco Amodio; Markus Poschke
Abstract: Output per worker is lower in agriculture than in other sectors, and relatively more so in poor countries. Sorting of workers can explain this if comparative and absolute advantage in agriculture are positively correlated. We investigate this correlation using representative household-level panel data from four African countries. We exploit information on households who engage in both agriculture and non-farm entrepreneurship -- about 1/3 of the population. More productive farming households are more likely to pursue entrepreneurship, allocate more hours to it, and are more likely to enter over time. This implies that agricultural comparative and absolute advantage are negatively correlated.
Keywords: agricultural productivity gap; selection; entrepreneurship; Africa
JEL Codes: J24; J31; J43; L26; O11; O13; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| More productive farming households (Q12) | More likely to engage in nonfarm entrepreneurship (L26) |
| More productive farming households (Q12) | Allocate more hours to nonfarm entrepreneurship (L26) |
| More productive farming households (Q12) | More likely to enter entrepreneurship over time (L26) |
| Higher absolute advantages in agriculture (N51) | More likely to engage in entrepreneurship (L26) |
| Higher productivity in nonagriculture (O49) | Work fewer hours in agriculture (J43) |
| More productive farming households (Q12) | Start nonagricultural enterprises over time (L26) |