Misallocation in Indian Agriculture

Marijn Bolhuis, Swapnika R. Rachapalli and Diego Restuccia

No 29363, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We exploit substantial variation in land-market institutions across Indian states and detailed household-level panel data to assess the effect of land-market distortions on agricultural productivity. We develop a model of heterogeneous farms and distorted land markets, featuring (a) state-level barriers to land-market participation and (b) idiosyncratic (farm-level) distortions to farm size. We use the framework to separately identify and estimate the two sources of land-market distortions in each state using farm data on productivity, land endowment, land-market participation, and operational farm size. We find substantial differences across states in rental barriers with large negative effects on agricultural productivity. An efficient reallocation of land in India increases agricultural productivity by 65 percent and by more than 100 percent in some states, with more than 50% of these effects attributed to state-level rental barriers. Distortions associated with land-market participation contribute substantially to agricultural productivity differences across Indian states.

JEL-codes: O11 O13 O4 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-agr and nep-eff
Note: DEV EFG PR
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Misallocation in Indian Agriculture (2024)
Working Paper: Misallocation in Indian Agriculture (2021)
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