Working Paper: CEPR ID: DP13433
Authors: Douglas Gollin; Christopher Udry
Abstract: Standard measures of productivity display enormous dispersion across farms in Africa. Crop yields and input intensities appear to vary greatly, seemingly in conflict with a model of efficient allocation across farms. In this paper, we present a theoretical framework for distinguishing between measurement error, unobserved heterogeneity, and potential misallocation. Using rich panel data from farms in Tanzania and Uganda, we estimate our model using a flexible specification in which we allow for several kinds of measurement error and heterogeneity. We find that measurement error and heterogeneity together account for a large fraction - as much as ninety percent -- of the dispersion in measured productivity. In contrast to some previous estimates, we suggest that the potential for efficiency gains through reallocation of land across farms and farmers may be relatively modest.
Keywords: agricultural productivity; misallocation; productivity measurement; firm productivity; dispersion; agricultural development; agricultural production function estimation
JEL Codes: O11; O12; O13; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Measurement error (C20) | Misallocation of resources (D61) |
| Unobserved heterogeneity (C21) | Misallocation of resources (D61) |
| Measurement error and unobserved heterogeneity (C21) | Productivity dispersion (D29) |