This paper quantifies the relative importance of sectoral productivity and labor market
distortions for structural change. I use a model in which labor productivity is the
product of TFP and human capital in each sector, but distortions generate wedges in
wage per efficiency worker across sectors. I calculate human capital by sector using
micro census data, and use the model to infer TFP and distortions such that it replicates
structural change in the US, India, Mexico and Brazil between 1960 and 2005. I
find that (1) TFP growth in agriculture drives most of the decline in its share of labor;
(2) the role of labor market distortions is limited.