Human Capital and the Urban and Structural Transformation of Countries

Pedro Ferreira, Alejandro Badel () and Alexander Monge-Naranjo
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Pedro Ferreira: Fundação Getulio Vargas

No 704, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We calibrate the model to match some of the salient patterns of structural transformation (sectoral TFP and allocation of labor), urban development (migration, urbanization) and income distribution observed in Brazil since 1960. We use the model to address a prevalent question in development: Why doesn't labor flow from seemingly less productive sectors (e.g. agriculture) to more productive sectors (e.g. manufacturing and services) in developing countries? In our model this lack of reallocation is explained by the lack of skills and qualifications of rural workers and by the cost of housing in cities. In the model, a large share of rural-urban migrants dwells in slums and works providing low-skill services. This feature of our model also explains why average TFP in services fall in periods of large rural-urban migrations.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:704

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