Working Paper: NBER ID: w31426
Authors: David Wuepper; Haoyu Wang; Wolfram Schlenker; Meha Jain; Robert Finger
Abstract: We estimate annual discontinuities in remotely-sensed crop yields at all international land borders and link them to changes in the economic freedom index by the Fraser Institute, a country-level measure of institutional quality. Each point of the ten-point index increases the discontinuity by 2.2% over the next five years, highlighting that institutional reforms have the potential to close some of the observed crop yield gap. Three subcategories are consistently significant: credit market regulation, inflation, and the top marginal tax rate. We present suggestive evidence that higher average yields are achieved through increased use of irrigation and mechanization. Yield variability remains unchanged, and reforms lead to cropland expansion through deforestation.
Keywords: Crop Yields; Economic Freedom; Institutional Quality; Agricultural Productivity
JEL Codes: O13; Q1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic Freedom Index (E02) | Crop Yields (Q15) |
| Institutional Reforms (O17) | Crop Yields (Q15) |
| Credit Market Regulation, Inflation, Top Marginal Tax Rate (E31) | Crop Yields (Q15) |
| Improvements in Institutions (O43) | Increased Irrigation and Mechanization (Q15) |
| Increased Irrigation and Mechanization (Q15) | Crop Yields (Q15) |
| Institutional Changes (D02) | Evapotranspiration (Q15) |
| Evapotranspiration (Q15) | Crop Yields (Q15) |
| Institutional Changes (D02) | Cropland Expansion (Q15) |
| Cropland Expansion (Q15) | Deforestation (Q23) |