Wages, Human Capital, and Barriers to Structural Transformation

We document for 13 countries ranging from rich (Canada, U.S.) to poor (India, Indonesia) that average wages are considerably lower in agriculture than in the other sectors. Moreover, agriculture has less educated workers and lower Mincer returns.We view these findings through the lens of a multi-sector model in which workers differin observed and unobserved characteristics and sectors differ in their human–capitalintensities. We derive expressions for the implied barriers to the reallocation of laborout of agriculture. We find that in our sample these barriers are considerably smallerthan what the macro–development literature has argued.