Building Schools, Shrinking Farm Labor Supply

Diane Charlton, University of California, Davis
Ed Taylor, University of California, Davis

Throughout the world, economic development is correlated with a decline in the agricultural labor force. As per capita income increases, the share of the population working in agriculture rapidly declines. There is little research investigating the role of human capital investments in the transition off of the farm. Does increased access to school reduce the probability that individuals work on the farm? We investigate this question using nationally representative household panel data from rural Mexico. If the returns to education are greater in the non-farm sector, then theory predicts that fewer individuals will work in agriculture as schools of higher grade levels are built near their homes. This implies that government programs that improve access to education simultaneously speed the transition off of the farm. This has further implications for the U.S. farm sector, which is historically dependent on an elastic labor supply from Mexico.