JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact email@example.com.. The University of Chicago Press is collaborating with JSTOR to digitize, preserve and extend access to Journal of Political Economy.Many widely used economic models implicitly assume that income shares should be identical across time and space. Although time-series data from industrial countries appear consistent with this notion, crosssection data generally appear to contradict the assumption. A commonly used calculation suggests that labor shares of national income vary from about .05 to about .80 in international cross-section data. This paper suggests that the usual approach underestimates labor income in small firms. Several adjustments for calculating labor shares are identified and compared. They all yield labor shares for most countries in the range of .65-.80.
We summarize the findings of a recently completed study of the productivity impacts of international crop genetic improvement research in developing countries. Over the period 1960 to 2000, international agricultural research centers, in collaboration with national research programs, contributed to the development of "modern varieties" for many crops. These varieties have contributed to large increases in crop production. Productivity gains, however, have been uneven across crops and regions. Consumers generally benefited from declines in food prices. Farmers benefited only where cost reductions exceeded price reductions.
2 Technically we should assume a small endowment of the nonagricultural good that is always consumed to avoid the fact that instantaneous utility is lowered when c increases from zero to a small positive amount. We ignore this for simplicity. 3 There are theoretical reasons to believe that a value close to a is appropriate. Models with endogenous fertility suggest that output per capita will be close to subsistence levels for economies that have not begun the process of industrialization. See Hansen and Prescott (forthcoming) and Oded Galor and David Weil (2000).
According to national accounts data, value added per worker is much higher in the nonagricultural sector than in agriculture in the typical country, particularly in developing countries. Taken at face value, this “agricultural productivity gap” suggests that labor is greatly misallocated across sectors. In this article, we draw on new micro evidence to ask to what extent the gap is still present when better measures of sector labor inputs and value added are taken into consideration. We find that even after considering sector differences in hours worked and human capital per worker, as well as alternative measures of sector output constructed from household survey data, a puzzlingly large gap remains.
Many theories link urbanization with industrialization; in particular, with the production of tradable (and typically manufactured) goods. We document that the expected relationship between urbanization and the level of industrialization is not present in a sample of developing economies. The breakdown occurs due to a large sub-sample of resource exporters that have urbanized without increasing output in either manufacturing or industrial services such as finance. To account for these stylized facts, we construct a model of structural change that accommodates two different paths to high urbanization rates. The first involves the typical movement of labor from agriculture into industry, as in many models of structural change; this stylized pattern leads to what we term "production cities" that produce tradable goods. The second path is driven by the income effect of natural resource endowments: resource rents are spent on urban goods and services, which gives rise to "consumption cities" that are made up primarily of workers in non-tradable services. We document empirically that there is such a distinction in the employment composition of cities between developing countries that rely on natural resource exports and those that do not. Our model and the supporting data suggest that urbanization is not a homogenous event, and this has possible implications for long-run growth.
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