Paper #1888

Title:

Industrialization without innovation

Authors:

Paula Bustos, Juanma Castro-Vincenzi, Joan Monràs and Jacopo Ponticelli

Date:

September 2023

Abstract:

Labor-saving technologies in agriculture cam foster structural transformation byre-leasing workers who find jobs in manufacturing. The traditional view is that factor reallocation towards manufacturing Generates innovation and productivity growth. We document, instead, that regions more exposed to a large and exogenous in-crease in agricultural productivity in Brazil industrialized but experienced lower manufacturing productivity growth. Workers released from agriculture were mostly unskilled and primarily moved to the least skill-intensive manufacturing industries. This paper explores the various Mechanisms that can account for the observed manufacturing productivity decline. Changes in worker composition and lower incentives to innovate within manufacturing play prominent roles.

Keywords:

agricultural productivity, skill-biased technical change, productivity, labor mobility, genetically engineered soy, Brazil

JEL codes:

F16, J43, O13, O14, O33, O41

Area of Research:

Macroeconomics and International Economics

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