A key feature of developing economies is that wages in agriculture are significantly
below those of other sectors. Using Brazilian household surveys and administrative
panel data, I use information on workers who switch sectors to decompose the drivers
of this gap. I find that most of the gap is explained by differences in worker composition.
The evidence speaks against the existence of large short-term gains from reallocating
workers out of agriculture and favors recently proposed Roy models of inter-sector
sorting. A calibrated sorting model of structural transformation can account for the
wage gap level observed and its decline as the economy transitioned out of agriculture.