Working Paper: NBER ID: w30489
Authors: Fabian Eckert; Michael Peters
Abstract: Between 1880 and 1920, the US agricultural employment share fell from 50% to 25%. However, despite aggregate demand shifting away from their sector of specialization, rural labor markets saw faster wage growth and industrialization than non-agricultural parts of the US. We propose a spatial model of the structural transformation to analyze the link between aggregate structural change and local economic development. The calibrated model shows that rural areas adapted to the decline of the agricultural sector by adopting technologies already in use in urban locations. Without such catchup growth, economic development would have been urban-biased and spatial inequality would have increased.
Keywords: structural transformation; spatial economics; rural development
JEL Codes: O1; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in agricultural employment share (J43) | Faster wage growth in rural areas (R19) |
| Decline in agricultural employment share (J43) | Industrialization in rural areas (O14) |
| Faster productivity growth in agriculture (O49) | Wage growth in rural areas (J39) |
| Technological catch-up in manufacturing (O14) | Industrialization in rural areas (O14) |
| Rural productivity convergence (O47) | Spatial structural change (L16) |
| If catch-up growth had not occurred (O41) | Economic development would have been urban-biased (R11) |
| Catch-up growth (O41) | Mitigation of adverse effects of structural change (L16) |