Agriculture and aggregate productivity: A quantitative cross-country analysis

Diego Restuccia, Dennis Yang and Xiaodong Zhu

Journal of Monetary Economics, 2008, vol. 55, issue 2, 234-250

Abstract: A decomposition of aggregate labor productivity based on internationally comparable data reveals that a high share of employment and low labor productivity in agriculture are mainly responsible for low aggregate productivity in poor countries. Using a two-sector general-equilibrium model, we show that differences in economy-wide productivity, barriers to modern intermediate inputs in agriculture, and barriers in the labor market generate large cross-country differences in the share of employment and labor productivity in agriculture. The model implies a factor difference of 10.8 in aggregate labor productivity between the richest and the poorest 5% of the countries in the world, leaving the unexplained factor at 3.2. Overall, this two-sector framework performs much better than a single-sector growth model in explaining observed differences in international productivity.

Date: 2008
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Working Paper: Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:55:y:2008:i:2:p:234-250

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