Search results

Cross-country labor productivity differences are larger in agriculture than in non-agriculture. We propose a new explanation for these patterns in which the self-selection of heterogeneous workers determines sector productivity. We formalize our theory in a general-equilibrium Roy model in which preferences feature a subsistence food requirement. In the model, subsistence requirements induce workers that are relatively unproductive at agricultural work to nonetheless select into the agriculture sector in poor countries. When parameterized, the model predicts that productivity differences are roughly twice as large in agriculture as non-agriculture even when countries differ by an economy-wide efficiency term that affects both sectors uniformly. (JEL J24, J31, J43, O11, O13, O40)

Abstract
We draw on household survey data from countries of all income levels and document that average unemployment rates increase with gross domestic product per capita. This is accounted for almost entirely by low—rather than high—educated workers. We interpret these facts in a model with frictional labour markets, a traditional self-employment sector, skill-biased productivity differences across countries, and unemployment benefits that become more generous with development. A calibrated version of the model does well in explaining the cross-country patterns that we document. Counterfactual exercises point to skill-biased productivity differences as the most important factor in explaining the cross-country unemployment patterns.

This paper builds a new internationally comparable database of hours worked to measure how hours vary with income across and within countries. We document that average hours worked per adult are substantially higher in low-income countries than in high-income countries. The pattern of decreasing hours with aggregate income holds for both men and women, for adults of all ages and education levels, and along both the extensive and intensive margin. Within countries, hours worked per worker are also decreasing in the individual wage for most countries, though in the richest countries, hours worked are flat or increasing in the wage. One implication of our findings is that aggregate productivity and welfare differences across countries are larger than currently thought. (JEL E23, E24, J22, J31, O11, O15)