This paper examines the labor reallocation across agriculture, manufacturing, and services, and their impacts on aggregate labor productivity in Brazil from 1950 to 2010. We use a multisector model that features nonhomothetic preferences with constant elasticity of substitution and wedge distortions. This framework allows us to decompose the drivers of labor reallocation into supply-side, demandside, and wedges. For the 1950-2010 period, demand-side effects were responsible for most of the reallocation of labor away from agriculture towards manufacturing and services. On the other hand, if we focus only on the 1980-2010 subperiod, supply-side drivers become the major determinant for labor reallocation.
multisector model; structural transformation; labor productivity