The Impact of Intersectoral Labor Reallocationon Economic Growth

This study seeks to explain economic growth differences in an aggregate production function framework, where labor reallocation from agriculture to modern sectors influences labor efficiency growth. The econometric analysis uses a panel of 65 countries over 1960-90. The results highlight: (a) the differences in labor reallocation impact on growth, controlled for using the intersectoral wedge in labor productivities; (b) the significance of labor reallocation effects, even after controlling for capital accumulation, initial conditions, and country effects; (c) the role of slow labor reallocation in explaining the dummy variable for Sub-Saharan Africa; (d) the role of initial education levels in explaining differences in labor reallocation rates.Economic growth;labor reallocation, labor efficiency, labor productivity, labor force, labor share, labor market, labor productivities, decreasing function, labor market flexibility, human capital accumulation, average productivity growth, labor market reforms, regional growth differences, labor policy, average wage, covariance matrix, labor markets, jobs