Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis / Stephen Ayerst, Loren Brandt, Diego Restuccia.

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Ayerst, Stephen

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30985.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: The expansion in farm size is an important contributor to agricultural productivity in developed countries, but the reallocation process is hindered in less developed economies. How do distortions to factor reallocation affect farm dynamics and agricultural productivity? We develop a model of heterogeneous farms making cropping choices and investing in productivity improvements. We calibrate the model using detailed farm-level panel data from Vietnam, exploiting regional differences in agricultural institutions and outcomes. We focus on south Vietnam and quantify the effect of higher measured distortions in the North on farm choices and agricultural productivity. We find that the higher distortions in north Vietnam reduce agricultural productivity by 46%, accounting for around 70% of the observed 2.5-fold difference between regions. Moreover, two-thirds of the productivity loss is driven by farms' choice of lower productivity crops and reductions in productivity-enhancing investment, which more than doubles the productivity loss from factor misallocation.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30985 (Browse shelf(Opens below))	Not For Loan

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February 2023.

The expansion in farm size is an important contributor to agricultural productivity in developed countries, but the reallocation process is hindered in less developed economies. How do distortions to factor reallocation affect farm dynamics and agricultural productivity? We develop a model of heterogeneous farms making cropping choices and investing in productivity improvements. We calibrate the model using detailed farm-level panel data from Vietnam, exploiting regional differences in agricultural institutions and outcomes. We focus on south Vietnam and quantify the effect of higher measured distortions in the North on farm choices and agricultural productivity. We find that the higher distortions in north Vietnam reduce agricultural productivity by 46%, accounting for around 70% of the observed 2.5-fold difference between regions. Moreover, two-thirds of the productivity loss is driven by farms' choice of lower productivity crops and reductions in productivity-enhancing investment, which more than doubles the productivity loss from factor misallocation.