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Technology Adoption, Capital Deepening, and International Productivity Differences

Chaoran Chen

No 9, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Cross-country differences in capital intensity are larger in the agricultural sector than in the non-agricultural sector, indicating that rich and poor countries differ in agricultural technology adoption. I build a two-sector general equilibrium model featuring technology adoption in agriculture. As the economy develops, farmers gradually adopt a modern capital-intensive technology to replace the traditional labour-intensive technology, as is observed in the U.S. historical data. Using this model, I find that the technology adoption channel is key to accounting for low agricultural capital intensity and labour productivity in poor countries. In the model, measured aggregate factors – land endowment, economy-wide productivity, and barriers to investment – can explain 1.56-fold more in rich-poor agricultural productivity differences compared to a model without technology adoption. I further show that land market frictions in agriculture impede technology adoption and magnify productivity differences.

New Economics Papers: this item is included in nep-agr, nep-dge, nep-eff and nep-opm
Date: 2017
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