This article argues that accounting for capital-embodied technology greatly increases the importance of capital in explaining cross-country differences in agricultural labor productivity. To do so, we draw on a novel data set of agricultural capital prices. We document that new capital is more expensive in richer countries, both in absolute terms and relative to old capital. A model of endogenous adoption of capital of different quality links these price differences to the path of capital-embodied technology. In particular, our model recovers the level of embodied technology from the price of new capital and the growth rate of embodied technology from the price of new capital relative to old capital. We then measure the stocks of quality-adjusted capital in agriculture for a sample of 16 countries at different stages of development. We find that adjusting for differences in quality almost doubles the importance of capital in accounting for cross-country differences in agricultural labor productivity: from 21% to 37%. In addition, improvements in capital quality have been an important source of agricultural labor productivity growth over the past 25 years, accounting for 21% and 35% of the productivity growth in poor and rich countries, respectively.
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We study differences in exposure to factor-biased technical change among occupations by providing the first measures of capital-embodied technical change (CETC) and of the elasticity of substitution between capital and labor at the occupational level. We document sizable occupational heterogeneity in both measures, but quantitatively, it is the heterogeneity in factor substitutability that fuels workers’ exposure to CETC. In a general equilibrium model of worker sorting across occupations, CETC accounts for almost all of the observed labor reallocation in the US between 1984 and 2015. Absent occupational heterogeneity in factor substitutability, CETC accounts for only 17 percent of it (JEL I26, J16, J24, J31, O33)
The tasks workers perform on the job are informative about the direction and the impact of technological change. We harmonize occupational task-content measures between two worker-level surveys, which separately cover developing and developed countries. Developing countries use routine-cognitive tasks and routine-manual tasks more intensively than developed countries, but less intensively use non-routine analytical tasks and non-routine interpersonal tasks. This is partly because developing countries have more workers in occupations with high routine content and fewer workers in occupations with high non-routine content. More importantly, a given occupation has more routine content and less non-routine content in developing countries than in developed countries. Since 2006, occupations with high non-routine content gained employment relative to those with high routine content in most countries, regardless of their income level or initial task intensity, indicating the global reaches of the technological change that reduces the demand for occupations with high routine content.
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