RIEB, Kobe University

The Labour Productivity Gap between Agricultural and Non-agricultural Sectors and Poverty in Asia

The objective of this paper is to examine how agricultural and non-agricultural labour productivities have grown over time and whether the growth pattern – proxied by the labour productivity gap in two sectors – affected poverty in low and middle income countries in Asia. We first examine whether the labour productivities in agricultural and non-agricultural sectors have converged or not using a five-year average panel dataset. We have found evidence that non-agricultural labour productivity and agricultural labour productivity did not converge as the former has grown faster and the gap has increased significantly over time. We then confirm that both agricultural and non-agricultural labour productivities have converged across countries and the convergence effect is stronger for the non-agricultural sector. We have also observed that, despite the relatively lower growth in agricultural labour productivity, the agricultural sector played an important role in promoting non-agricultural labour productivity and thus in non-agricultural growth. Finally, we have found some evidence that the labour productivity gap reduces rural and urban poverty as well as the national inequality.