DP10297 Life During Structural Transformation
|Author(s):||Jonathan Temple, Huikang Ying|
|Publication Date:||December 2014|
|Keyword(s):||inequality, Kuznets curve, Roy model, structural transformation|
|JEL(s):||D31, O15, O41|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10297|
We examine whether structural transformation leads to a Kuznets curve. We present a dynamic general equilibrium model with heterogeneous workers, occupational self-selection and selective migration, and calibrate the model to survey data for Malawi. We show that structural transformation raises living standards unevenly. As development proceeds, the movement of workers from agriculture is associated with rising wage inequality, rather than a Kuznets curve. The increase in sectoral wage inequality is pronounced for agriculture. At the same time, structural transformation is associated with major reductions in rural poverty, and eventually in urban poverty.