Shilpi, ForhadEmran, Shahe2016-06-142016-06-142016-05https://hdl.handle.net/10986/24520This paper provides evidence on the impacts of agricultural productivity on employment growth and structural transformation of non-farm activities. To guide the empirical work, this paper develops a general equilibrium model that emphasizes distinctions among non-farm activities in terms of tradable-non-tradable and the formal-informal characteristics. The model shows that when a significant portion of village income is spent on town/urban goods, restricting empirical analysis to the village sample leads to underestimation of agriculture's role in employment growth and transformation of non-farm activities. Using rainfall as an instrument for agricultural productivity, empirical analysis finds a significant positive effect of agricultural productivity growth on growth of informal (small-scale) manufacturing and skilled services employment, mainly in education and health services. For formal employment, the effect of agricultural productivity growth on employment is found to be largest in the samples that include urban areas and rural towns compared with rural areas alone. Agricultural productivity growth is found to induce structural transformation within the services sector with employment in formal/skilled services growing at a faster pace than that of low skilled services.en-USCC BY 3.0 IGOJOBSEMPLOYMENTAGRICULTURAL GROWTHFARM GROWTHMOTIVATIONRURAL INEQUALITYECONOMIC GROWTHACCOUNTINGPRODUCTIONUTILITY FUNCTIONSSUPPLY CURVEEMPLOYMENT SHAREINFORMAL SECTORSTRUCTURAL CHANGEINCOMELABOR ALLOCATIONINTEREST RATEAGRICULTURAL DEVELOPMENTTOTAL LABOR FORCEINFORMATIONLABOR FORCEDOMESTIC MARKETELASTICITYPOLITICAL ECONOMYWELFAREOPTIMIZATIONEFFECTSPOOR PEOPLEEQUILIBRIUMVARIABLESRURAL POPULATIONPRODUCTIVITY INCREASEMEASURESACTIVE LABORPOVERTY REDUCTIONAGRICULTURAL WAGEDEVELOPMENTDISAGGREGATED ANALYSISEMPLOYMENT LEVELDOMESTIC WORKERSAGRICULTURAL PRODUCTIVITY GROWTHLABOR MARKETCROP YIELDTOTAL FACTOR PRODUCTIVITYPRODUCTIVITY IMPROVEMENTSRURAL HOUSEHOLDIRRIGATION EXPANSIONRURAL HOUSEHOLD INCOMEEMPLOYMENT LEVELSDEVELOPMENT ECONOMICSRURAL INCOMEFIRING COSTSINCOME GROWTHFOOD PRICEFARM EMPLOYMENTPRODUCTIVITYNON-FARM EMPLOYMENTEXTERNALITIESINDUSTRIALIZATIONUNEMPLOYEDAGRICULTURAL WAGESEMPLOYMENT COMPOSITIONMARKETSORGANIZATIONSHOUSEHOLD INCOMEECONOMIC CENSUSESFARM WORKERSLABORTOTAL EMPLOYMENTUTILITYRURAL VILLAGESFARM SECTOREXPORT MARKETFOOD PRODUCTIONUNEMPLOYMENTCROP YIELDSLABOR COSTPRODUCTIVITY GROWTHCONSUMPTIONGENERAL EQUILIBRIUMHUMAN CAPITALOPPORTUNITY COSTEMPLOYMENT INFORMATIONWORKERSWAGESPOLICIESEMPLOYMENT SITUATIONCLIMATE CHANGEDOMESTIC MARKETSREAL WAGEPRODUCTIVITY INCREASESLABOR DEMANDPRODUCTION FUNCTIONSDIVISION OF LABORFARM ACTIVITIESDEMANDUTILITY FUNCTIONAGRICULTURAL EMPLOYMENTAGRICULTURAL SECTORRURAL ECONOMYECONOMYAGRICULTURECONSUMERSEMPLOYMENT GROWTHRURALRURAL TOWNSMEASUREMENTWAGE RATECROP SCIENTISTSLABOR MOBILITYPRODUCTION FUNCTIONECONOMICSEMPLOYMENT IN AGRICULTUREAGRICULTURAL YIELDSMACROECONOMIC SHOCKSTRADEGDPGOODSTHEORYGROWTH RATEINTERNATIONAL MARKETINVESTMENTMARKET EQUILIBRIUMIRRIGATIONRISKEXPANSION OF IRRIGATIONRURAL AREASPOVERTYSUPPLYINCIDENCE OF POVERTYLABOR SUPPLYAGRICULTURAL PRODUCTIVITYINFORMAL EMPLOYMENTPOORFOOD PROCESSINGLABOR MARKETSOUTCOMESWATER FOR IRRIGATIONPRICESLABOR REGULATIONSLABOR MIGRATIONMARKET WAGENON-FARM SECTORDEVELOPMENT POLICYINEQUALITYEXCLUSION RESTRICTIONEMPLOYEESWorking PaperWorld Bank10.1596/1813-9450-7685