Risk, Selection and Productivity Differences

Wenbiao Cai

Departmental Working Papers from The University of Winnipeg, Department of Economics

Abstract: Two observations about poor countries are puzzling: (1) the majority of their labor force work in agriculture despite significantly higher wage in nonagriculture; (2) labor productivity difference between rich and poor countries is much larger in agriculture than in nonagriculture. This paper argues that these observations are a result of low economy-wide efficiency and incomplete markets to insure against income risk. I formalize this argument in a model that marries two classics: Roy (1951) and Harris and Todaro (1970). The calibrated model generates cross-country difference in labor productivity that is 3 times larger in agriculture than in nonagriculture and account for most of the cross-country variation in nonagriculture wage premium.

Pages: 28 pages
Date: 2016-06
New Economics Papers: this item is included in nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://economics.uwinnipeg.ca/RePEc/winwop/2016-02.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to economics.uwinnipeg.ca:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:win:winwop:2016-02

Access Statistics for this paper

More papers in Departmental Working Papers from The University of Winnipeg, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Soham Baksi ().