Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis

Stephen Ayerst, Loren Brandt () and Diego Restuccia

No 30985, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In less developed economies the allocation of factor inputs to more productive farms is often hindered. To analyze how distortions to factor reallocation affect farm dynamics and agricultural productivity, we develop a model of heterogeneous farms that make cropping choices and invest 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 41%, accounting for 61% 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 misallocation.

JEL-codes: O11 O14 O4 Q12 Q15 Q16 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-agr, nep-eff and nep-sea
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Related works:
Working Paper: Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis (2024)
Working Paper: Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis (2023)
Working Paper: Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis (2023)
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