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Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China

Loren Brandt, Jessica Leight, Diego Restuccia () and Tasso Adamopoulos
Additional contact information
Loren Brandt: University of Toronto
Tasso Adamopoulos: York University

No 404, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We use household-level panel data from China and a quantitative framework to document the extent and consequences of factor misallocation in agriculture. We find that there are substantial frictions in both the land and capital markets linked to land institutions in rural China that disproportionately constrain the more productive farmers. These frictions reduce aggregate agricultural productivity in China by affecting two key margins: (1) the allocation of resources across farmers (misallocation) and (2) the allocation of workers across sectors, in particular the type of farmers who operate in agriculture (selection). We show that selection can substantially amplify the static misallocation effect of distortionary policies by affecting occupational choices that worsen the distribution of productive units in agriculture.

New Economics Papers: this item is included in nep-agr, nep-cna, nep-eff, nep-opm, nep-tid and nep-tra
Date: 2017
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Working Paper: Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China (2017) Downloads
Working Paper: Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China (2017) Downloads
Working Paper: Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:404

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