Structural Transformation and the Agricultural Wage Gap

A key feature of developing economies is that wages in agriculture are significantlybelow those of other sectors. Using Brazilian household surveys and administrativepanel data, I use information on workers who switch sectors to decompose the driversof this gap. I find that most of the gap is explained by differences in worker composition.The evidence speaks against the existence of large short-term gains from reallocatingworkers out of agriculture and favors recently proposed Roy models of inter-sectorsorting. A calibrated sorting model of structural transformation can account for thewage gap level observed and its decline as the economy transitioned out of agriculture