Abstract
This article investigates the contribution of labour and capital reallocation from the farm to the nonfarm sector to Total Factor Productivity (TFP) Growth (TFPG). We find that if labour reallocation is hypothetically suppressed in economies experiencing rapid structural transformation, that is, South Korea and Taiwan, the annualized long-term TFPG rate can be reduced by more than 0.8 percentage points. Such an effect is significant. © 2012 Taylor & Francis.