Does Schooling Cause Structural Transformation

August 01, 2019

Tommaso Porzio and Gabriella Santangelo


We show that the global schooling increase during the 20th century affected structural transformation by changing the supply of agricultural labor. We develop an analytical model of frictional labor reallocation out of agriculture to infer changes in birth-cohort characteristics from observed data on agricultural employment. Bringing the model to microdata from 49 countries, we find that the increase in schooling was accompanied by a large shift in the labor force’s comparative advantage away from agriculture. We provide empirical evidence to suggest this relationship was causal. With fixed prices, the resulting decrease in the supply of agricultural workers can account for almost half of the observed reallocation out of agriculture. However, in general equilibrium, the net effect is ambiguous.

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