Abstract

Economic development is associated with a structural transformation, where labor is reallocated out of agriculture to other sectors. However, whether this structural transformation is triggered by increases in agricultural productivity –Push forces– or by improvements in productivity in other sectors –Pull forces– remains an open question. In this paper, I study the effect of the tractor, a very important push factor, on the structural transformation of the French economy between 1970 and 2000. First, I derive conditions under which tractor technical change, either from decreases in tractor prices or increases in tractor productivity, is labor-saving and pushes labor out of agriculture in an open economy two-sector model. Second, I propose a novel empirical strategy to identify the parameters of this model using data on tractor power and exogenous geographical variations in the terrain slope. My estimates show that tractor technical change is labor-saving and led to labor reallocation out of agriculture. I nevertheless show in counterfactual simulations that tractor technical change only accounted for around 4% of the overall labor reallocation during this period. However, I observe heterogeneous effects with respect to the source of technical change. In particular, while reductions in tractor prices had limited impact on the demand for agricultural labor, improvements in tractor productivity have the potential to trigger the structural transformation.

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