The Demographic Transition and Structural Transformation

Organised by

• Department of Economics

We study the effect of the demographic transition on structural transformation. In a panel of countries, higher fertility in past decades reduces the agricultural employment share today. To better understand the mechanisms driving this cross-country relationship, we leverage the quasi-random placement of a programme which reduced fertility and early-life mortality in rural Bangladesh. We use rich data that allows us to follow treated and controlled households 35 years later. We find that the demographic transition slows down structural transformation. Increased labour market and intrahousehold competition drove control households - which were relatively larger due to the programme - to send workers to urban areas in search of employment in manufacturing. By contrast, the programme led to a 5 percentage point rise in the share of household working hours spent in agriculture and a 3 percentage point fall in manufacturing. Treated farmers adjusted to smaller household sizes by more intensively using labor-substituting technology, capital, and intermediate inputs.

Co-authors: Tania Barham, CU-Boulder; Randall Kuhn, UCLA; Patrick Turner, University of Notre Dame