Misallocation in Indian Agriculture / Marijn A. Bolhuis, Swapnika R. Rachapalli, Diego Restuccia.

Format:

Book

Author/Creator:

Bolhuis, Marijn A.

Contributor:

National Bureau of Economic Research.

Rachapalli, Swapnika R.

Restuccia, Diego.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29363.

NBER working paper series no. w29363

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We exploit substantial variation in land-market institutions across Indian states and detailed micro household-level panel data to assess the effect of distortions in land rental markets on agricultural productivity. We provide empirical evidence that states with more rental-market activity feature less misallocation and reallocate land more efficiently over time. We develop a model of heterogeneous farms and land rentals to estimate land-market distortions in each state. Land rentals have substantial positive effects on agricultural productivity: an efficient reallocation of land increases agricultural productivity by 38 percent on average and by more than 50 percent in states with highly distorted rental markets. Both farm and state-level land market distortions are quantitatively important, with state-level wedges accounting for a significant fraction of rental market participation differences across states. Land market distortions contribute about one-third to the large differences in agricultural total factor productivity across Indian states.

Notes:

Print version record

October 2021.