Working Paper: NBER ID: w30985
Authors: Stephen Ayers; Loren Brandt; Diego Restuccia
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.
Keywords: agricultural productivity; Vietnam; distortions; farm dynamics; general equilibrium
JEL Codes: O11; O14; O4; Q12; Q15; Q16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher distortions in North Vietnam (P39) | agricultural productivity (Q11) |
| static factor misallocation (F16) | agricultural productivity (Q11) |
| dynamic misallocation (D51) | agricultural productivity (Q11) |
| regional distortions (R11) | growth rate of farmer productivity (O47) |