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Recent research has pointed to large gaps in labor productivity between the agricultural and non-agricultural sectors in low-income countries, as well as between workers in rural and urban areas. Most estimates are based on national accounts or repeated cross-sections of micro-survey data, and as a result typically struggle to account for individual selection between sectors. This paper contributes to this literature using long-run individual-level panel data from two low-income countries (Indonesia and Kenya). Accounting for individual fixed effects leads to much smaller estimated productivity gains from moving into the non-agricultural sector (or urban areas), reducing estimated gaps by over 80 percent. Per capita consumption gaps between non-agricultural and agricultural sectors, as well as between urban and rural areas, are also close to zero once individual fixed effects are included. Estimated productivity gaps do not emerge up to five years after a move between sectors, nor are they larger in big cities. We evaluate whether these findings imply a re-assessment of the current conventional wisdom regarding sectoral gaps, discuss how to reconcile them with existing cross-sectional estimates, and consider implications for the desirability of sectoral reallocation of labor.

Zonder onderwerpscode: economie

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Self-control problems constitute a potential explanation for the under-investment in preventive health care observed in low-income countries. A commonly proposed policy tool to solve such problems is offering consumers commitment devices. We conduct a field experiment to evaluate the effectiveness of different types of theoretically-motivated commitment contracts in increasing preventive doctor visits by hypertensive patients in rural India. We document varying levels of takeup of the different commitment contracts, but find no effects on actual doctor visits or individual health outcomes. Thus, a substantial number of individuals pay for commitments, but then fail to follow through on the specified task, losing money without experiencing any health benefit. We develop and structurally estimate a pre-specified model of consumer behavior under present bias with varying levels of naivete. The results are consistent with a large share of individuals being partially naive about their own self-control problems: in other words, they are sophisticated enough to demand some commitment, but overly optimistic about whether a given commitment is sufficiently strong to be effective. The results suggest that commitment devices may in practice be welfare diminishing, at least in some contexts, and serve as a cautionary tale about the role of these contracts in the health care sector.