Technology adoption and structural transformation: evidence from the industrialization of the sugarcane sector

Abstract

This paper shows how the adoption of an agricultural technology necessary to meet new environmental standards can prompt structural transformation in an emerging economy. We study the fast spread of mechanical harvesting that followed the prohibition of pre-harvest field burning in the sugarcane sector in S˜ao Paulo state, Brazil. We combine remote-sensing data on sugarcane production and censuses data to estimate the impacts of field mechanization on the local labor markets. We find that the adoption of mechanical harvesting led to industrialization of the field; a one standard deviation larger adoption of agricultural mechanization reduces the share of workers employed in the agricultural sector by 2.3 percentage points, and increases the employment share of manufacturing and services sector by 1.7 and 1.1 percentage points, respectively.