Industrialization without Innovation

Jacopo Ponticelli, Paula Bustos (), Juan Castro-Vincenzi and Joan Monras
Authors registered in the RePEc Author Service: Juan Manuel Castro Vincenzi

No 13379, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The introduction of labor-saving technologies in agriculture can release workers who find occupation in the manufacturing sector. The traditional view is that this structural transformation process leads to economic growth. However, if workers leaving agriculture are unskilled, the labor reallocation process reinforces comparative advantage in the least skill-intensive manufacturing industries. We embed this mechanism in a multi-sector endogenous growth model where only skill-intensive manufacturing industries innovate and generate knowledge spillovers. In this setup, the increase in the relative size of the unskilled-labor intensive industries reduces the incentives to innovate and slows down growth. We test the predictions of the model in the context of a large and exogenous increase in agricultural productivity in Brazil. We use social security data to develop a new measure of the labor input in innovation which is representative at any level of spatial aggregation. We find that regions adopting the new agricultural technology experienced a reallocation of unskilled workers away from agriculture into the least R&D-intensive manufacturing industries. The expansion of low-R&D industries attracted workers away from innovative occupations in high-R&D industries, slowing down local aggregate manufacturing productivity growth.

Keywords: Structural transformation; Skill-biased technical change; Labor mobility; Genetically engineered soy; Brazil (search for similar items in EconPapers)
JEL-codes: F16 J43 O13 O14 O33 O41 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-eff, nep-gro, nep-knm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Industrialization without Innovation (2024)
Working Paper: Industrialization without Innovation (2019)
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