Industrialization without Innovation

73 Pages Posted: 25 May 2018 Last revised: 14 Sep 2020

See all articles by Paula Bustos

Paula Bustos

CREI; Universitat Pompeu Fabra; Barcelona GSE

Juan Manuel Castro-Vincenzi

Princeton University

Joan Monras

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Barcelona Graduate School of Economics (Barcelona GSE)

Jacopo Ponticelli

Northwestern University - Kellogg School of Management; NBER

Multiple version iconThere are 3 versions of this paper

Date Written: September 12, 2020

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

JEL Classification: F16, J43, O13, O14, O33, O41

Suggested Citation

Bustos, Paula and Castro-Vincenzi, Juan Manuel and Monras, Joan and Ponticelli, Jacopo, Industrialization without Innovation (September 12, 2020). Global Poverty Research Lab Working Paper No. 18-106, Available at SSRN: https://ssrn.com/abstract=3178274 or http://dx.doi.org/10.2139/ssrn.3178274

Paula Bustos

CREI; Universitat Pompeu Fabra ( email )

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Juan Manuel Castro-Vincenzi

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Joan Monras (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Jacopo Ponticelli

Northwestern University - Kellogg School of Management ( email )

2211 Campus Dr
Evanston, IL 60208
United States

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/ponticelli/index.html

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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