Productivity growth and agricultural out-migration in the United States

In the 20th century U.S., the average annual decline in the relative farm share of employment was 3.6%. Despite this rapid reallocation of labor, a large wage gap persisted between the farm and non-farm sectors that declined only slowly over time. We develop a model of farm out-migration with three driving forces: (i) absolute farm productivity growth in conjunction with subsistence food consumption, (ii) relative farm productivity growth in conjunction with a low elasticity of substitution between farm and non-farm goods, and (iii) endogenously declining wage gaps. Quantitative features of the model accord well with the U.S. experience during this period.