Working Paper: NBER ID: w25871
Authors: Paula Bustos; Juan Manuel Castrovincenzi; Joan Monras; Jacopo Ponticelli
Abstract: The introduction of labor-saving technologies in agriculture can foster structural transformation by releasing workers who find occupation in other sectors. The traditional view is that the reallocation of labor towards manufacturing generates innovation and productivity growth. We conduct an empirical investigation of this structural transformation process in the context of a large and exogenous increase in agricultural productivity in Brazil. We find that workers leaving agriculture were mostly unskilled. Thus, they found employment in the least skill-intensive manufacturing industries. Next, we investigate the effect of this change in comparative advantage within the manufacturing sector on innovation. We use social security data to develop a new measure of the labor input in innovation that is representative at any level of spatial aggregation. We find that regions with faster agricultural productivity growth experienced a reallocation of unskilled workers away from agriculture into the least R&D-intensive manufacturing industries. The expansion of low-R&D industries attracted workers away from innovative occupations in high-R&D industries, slowing down local aggregate manufacturing productivity growth.
Keywords: Labor-saving technologies; Agricultural productivity; Structural transformation; Manufacturing productivity; Innovation
JEL Codes: F16; F43; O13; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reallocation of unskilled workers from agriculture to manufacturing (F66) | Reinforcement of comparative advantages in low-R&D intensive manufacturing industries (O25) |
| Reinforcement of comparative advantages in low-R&D intensive manufacturing industries (O25) | Slowdown of local aggregate manufacturing productivity growth (O49) |
| Inflow of unskilled agricultural workers into low-skill manufacturing industries (F66) | Reduction in innovation activities within high-skill industries (O39) |
| Reduction in innovation activities within high-skill industries (O39) | Decrease in overall manufacturing productivity growth (O49) |
| Labor-saving agricultural technologies (GE soy) (Q16) | Reallocation of unskilled workers from agriculture to manufacturing (F66) |