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

Format:

Book

Author/Creator:

Ayerst, Stephen.

Contributor:

National Bureau of Economic Research.

Brandt, Loren.

Restuccia, Diego.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30985.

NBER working paper series no. w30985

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

The expansion in farm size is an important contributor to agricultural productivity in developed countries where more productive farms are larger, but in less developed economies the allocation of factor inputs to more productive farms is hindered. How do distortions to factor-input allocation 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 47%, accounting for 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 static factor misallocation.

Notes:

Print version record

February 2023.