Essays on the macroeconomics of dual economies

This dissertation considers three aspects of the interaction of the rural and urban sectors on the macroeconomics of developing countries. The first essay considers the effect that factor market imperfections have on measured aggregate productivity levels across countries. Using a sample of countries in the time period 1970--1990, I find that factor market imperfections can lower measured productivity by around fifty percent in some developing countries. Variation in this productivity effect is able to explain up to one-half of the variation in log income per capita across countries, and up to four-fifths of variation in aggregate TFP variation. The second essay suggests that initial land endowments, both their size and distribution, could have affected the implementation of human capital promoting institutions, and thus the pace and nature of the transition from an agricultural to an industrial economy. The basic premise of this research, regarding the negative effect of land inequality on public expenditure on education is established empirically based on cross-state data from the beginning of the 20th century in the United States. The final essay examines the empirical evidence linking land inequality with several measures of economic development. Previous research has relied on measures of land inequality that capture only inequality within the class of landholders, ignoring completely the issue of landlessness. Using a new measure of the breadth of landholdings we fail to find significant and robust relationships between land inequality and institutions or financial development. I do find that lower landlessness, but not inequality of land distribution, is associated with greater public provision of education.