Internal Migration and the Spatial Reorganization of Agriculture

This paper studies how agricultural production responds to the loss of agricultural labor during the process of urbanization and structural transformation. Using household microdata from India and exogenous variation in migration opportunities induced by urban income shocks, we show that agricultural households do not systematically replace lost labor with increased capital. Instead, they cultivate less land and lower their use of agricultural technology, reducing crop production. Resulting changes in land and crop prices induce non-migrant households to expand agricultural investments and production. In aggregate, market adaptation mitigates over three-fourths of the direct agricultural losses from urbanization. Spatial reorganization moves food production from land near urban areas toward more remote areas with lower emigration.