(Chen, Restuccia, and Santaeulàlia-Llopis 2022). But the impact of higher agricultural productivity on economy-wide employment is ambiguous. Although increased agricultural productivity may reduce the need for agricultural employment, it may also expand opportunities in other sectors (such as food processing and transportation) and free up labor to work elsewhere (Deininger et al. 2014 for China; Do and Iyer 2008 for Vietnam). What happens to economy-wide EWAPs in the short term depends on how quickly demand and supply adjust in other sectors.

Rapid urbanization can be part of the process of structural transformation from agriculture to manufacturing and services. There is evidence that urbanization results in income and productivity gains, but employment gains are often modest and occur, at least initially, in the informal sector (Turok and McGranaham 2013). That said, agglomeration benefits such as economies of scale and lower transaction costs in urban centers can reduce the length of unemployment spells and facilitate quick reentry into employment (Annez and Buckley 2009).

The World Bank _Enterprise Survey_ asks firms whether access to land constitutes a constraint on doing business. We include percent of firms that identified access to land as a major constraint.<sup>5</sup>

# **Establishment size**

Larger firms hire more workers. But many factors can hold back firms’ growth. Tax and regulatory policies are often size-dependent—that is, they affect larger firms more than smaller ones. Inefficient input markets, such as for land, capital, and labor, or uneven playing fields in product markets prevent firms from growing and slow firm entry. The heavier regulatory burden on larger firms can discourage firms’ growth and promotes informal sector activity. Informal firms, which tend to be smaller, also tend to grow more slowly and this holds back aggregate employment and productivity growth (Ohnsorge and Yu 2022). Indeed, greater policy distortions have been associated with smaller firm size which, in turn, has been associated with slower aggregate employment growth (Bento and Restuccia 2021; Restuccia and Rogerson 2017). In cross-country studies, smaller establishment sizes have been associated with institutional features that discourage productive firms from hiring labor (Bento and Restuccia 2021; Hsieh and Klenow 2014).

We include the average establishment size for the services and manufacturing sectors among the correlates. The data is from Bento and Restuccia (2021).

# **Human capital**

Human capital growth, including improvement in education, training, and health, plays an important role in the shift from agriculture to non-agriculture activities (Lee and Malin 2013; Porzio, Rossi, and Santangelo 2022). A workforce that has inadequate education, training and/or health care (hence, weak human capital) makes sectoral shifts more challenging. We include literacy rates, government spending on education as a percent of GDP, and the gender gap in secondary education attainment to capture a country’s level of human capital. These data are drawn from the WDI.

# **Gender-related laws**

Finally, laws that promote gender equality (in the workplace, in pay, and in marriage) can increase women’s employment, while laws that protect women’s mobility have been shown to increase women’s willingness to travel for better work opportunities (Braunmiller et al. 2023a; 2023b; Roy

> 5 We also tested for significant correlations with population density and the urban population share but found none.

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