Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh

This paper uses a framework that goes beyond rural-urban dualism and highlights the role of small town economy in understanding structural change in a developing country. It provides a theoretical and empirical analysis of the role of agricultural...

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Main Authors:	Emran, M. Shahe, Shilpi, Forhad
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2017
Subjects:	AGRICULTURAL PRODUCTIVITY DUALISM STRUCTURAL TRANSFORMATION EMPLOYMENT RURAL LABOR MARKET
Online Access:	http://documents.worldbank.org/curated/en/632031496763345726/Beyond-dualism-agricultural-productivity-small-towns-and-structural-change-in-Bangladesh http://hdl.handle.net/10986/27287

id	okr-10986-27287
recordtype	oai_dc
spelling	okr-10986-272872021-06-08T14:42:47Z Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh Emran, M. Shahe Shilpi, Forhad AGRICULTURAL PRODUCTIVITY DUALISM STRUCTURAL TRANSFORMATION EMPLOYMENT RURAL LABOR MARKET This paper uses a framework that goes beyond rural-urban dualism and highlights the role of small town economy in understanding structural change in a developing country. It provides a theoretical and empirical analysis of the role of agricultural productivity in structural transformation in the labor market. The empirical work is based on a general equilibrium model that formalizes the demand and labor market linkages: the small-town draws labor away from the rural areas to produce goods and services whose demand may depend largely on rural income. The theory clarifies the role played by the income elasticity of demand and the wage elasticity with respect to productivity increase in agriculture. For productivity growth to lead to a demand effect, the wage elasticity has to be lower than a threshold. When the demand for goods and services produced in small towns comes mainly from the adjacent rural areas, the demand effect can outweigh the negative wage effect, and lead to higher employment in the town-goods sector. Using rainfall as an instrument, the empirical analysis finds a significant positive effect of agricultural productivity on rice yield and agricultural wages. Productivity shock increases wages more in the rural sample compared with the small town economy sample, but structural change in employment is more pronounced in the small-town economy. In the rural sample, it increases employment only in small-scale manufacturing and services. In contrast, a positive productivity shock has large and positive impacts on employment in construction and transport, education, health and other services, and manufacturing employment in larger scale enterprises located in small towns and cities. Agricultural productivity growth induces structural transformation within the services sector in small towns, with employment in skilled services growing at a faster pace than that of low skilled services. 2017-06-21T16:38:46Z 2017-06-21T16:38:46Z 2017-06 Working Paper http://documents.worldbank.org/curated/en/632031496763345726/Beyond-dualism-agricultural-productivity-small-towns-and-structural-change-in-Bangladesh http://hdl.handle.net/10986/27287 English en_US Policy Research Working Paper;No. 8087 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia Bangladesh
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	AGRICULTURAL PRODUCTIVITY DUALISM STRUCTURAL TRANSFORMATION EMPLOYMENT RURAL LABOR MARKET
spellingShingle	AGRICULTURAL PRODUCTIVITY DUALISM STRUCTURAL TRANSFORMATION EMPLOYMENT RURAL LABOR MARKET Emran, M. Shahe Shilpi, Forhad Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh
geographic_facet	South Asia Bangladesh
relation	Policy Research Working Paper;No. 8087
description	This paper uses a framework that goes beyond rural-urban dualism and highlights the role of small town economy in understanding structural change in a developing country. It provides a theoretical and empirical analysis of the role of agricultural productivity in structural transformation in the labor market. The empirical work is based on a general equilibrium model that formalizes the demand and labor market linkages: the small-town draws labor away from the rural areas to produce goods and services whose demand may depend largely on rural income. The theory clarifies the role played by the income elasticity of demand and the wage elasticity with respect to productivity increase in agriculture. For productivity growth to lead to a demand effect, the wage elasticity has to be lower than a threshold. When the demand for goods and services produced in small towns comes mainly from the adjacent rural areas, the demand effect can outweigh the negative wage effect, and lead to higher employment in the town-goods sector. Using rainfall as an instrument, the empirical analysis finds a significant positive effect of agricultural productivity on rice yield and agricultural wages. Productivity shock increases wages more in the rural sample compared with the small town economy sample, but structural change in employment is more pronounced in the small-town economy. In the rural sample, it increases employment only in small-scale manufacturing and services. In contrast, a positive productivity shock has large and positive impacts on employment in construction and transport, education, health and other services, and manufacturing employment in larger scale enterprises located in small towns and cities. Agricultural productivity growth induces structural transformation within the services sector in small towns, with employment in skilled services growing at a faster pace than that of low skilled services.
format	Working Paper
author	Emran, M. Shahe Shilpi, Forhad
author_facet	Emran, M. Shahe Shilpi, Forhad
author_sort	Emran, M. Shahe
title	Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh
title_short	Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh
title_full	Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh
title_fullStr	Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh
title_full_unstemmed	Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh
title_sort	beyond dualism : agricultural productivity, small towns, and structural change in bangladesh
publisher	World Bank, Washington, DC
publishDate	2017
url	http://documents.worldbank.org/curated/en/632031496763345726/Beyond-dualism-agricultural-productivity-small-towns-and-structural-change-in-Bangladesh http://hdl.handle.net/10986/27287
_version_	1764464112755015680

Beyond Dualism : Agricultural Productivity, Small Towns, and Structural Change in Bangladesh

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