Advanced Search
MyIDEAS: Login

How important are dual economy effects for aggregate productivity?

Contents:

Author Info

  • Vollrath, Dietrich

Abstract

This paper brings together development accounting techniques and the dual economy model to address the role that factor markets have in creating variation in aggregate total factor productivity (TFP). Development accounting research has shown that much of the variation in income across countries can be attributed to differences in TFP. The dual economy model suggests that aggregate productivity is depressed by having too many factors allocated to low productivity work in agriculture. Data show large differences in marginal products of similar factors within many developing countries, offering prima facie evidence of this misallocation. Using a simple two-sector decomposition of the economy, this article estimates the role of these misallocations in accounting for the cross-country income distribution. A key contribution is the ability to bring sector-specific data on human and physical capital stocks to the analysis. Variation across countries in the degree of misallocation is shown to account for 30-40% of the variation in income per capita, and up to 80% of the variation in aggregate TFP.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VBV-4S7BDKF-1/2/650fc2554fac6d22b197e44aa56c55a7
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 88 (2009)
Issue (Month): 2 (March)
Pages: 325-334

as in new window
Handle: RePEc:eee:deveco:v:88:y:2009:i:2:p:325-334

Contact details of provider:
Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Resource allocation Labor allocation Dual economy Income distribution Factor markets TFP;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. de Melo, Jaime A P, 1977. "Distortions in the Factor Market: Some General Equilibrium Estimates," The Review of Economics and Statistics, MIT Press, vol. 59(4), pages 398-405, November.
  2. Chang-Tai Hsieh & Peter J. Klenow, 2003. "Relative Prices and Relative Prosperity," NBER Working Papers 9701, National Bureau of Economic Research, Inc.
  3. Jonathan Temple & Ludger Wößmann, 2006. "Dualism and cross-country growth regressions," Ifo Working Paper Series Ifo Working Paper No. 33, Ifo Institute for Economic Research at the University of Munich.
  4. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
  5. Tao Yang, Dennis, 2004. "Education and allocative efficiency: household income growth during rural reforms in China," Journal of Development Economics, Elsevier, vol. 74(1), pages 137-162, June.
  6. Sergio Rebelo & Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 01/85, International Monetary Fund.
  7. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
  8. Caselli, Francesco, 2004. "Accounting for Cross-Country Income Differences," CEPR Discussion Papers 4703, C.E.P.R. Discussion Papers.
  9. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  10. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
  11. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  12. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
  13. Marvin Goodfriend & John McDermott, 1994. "Early development," Working Paper 94-02, Federal Reserve Bank of Richmond.
  14. Tomas Kögel & Alexia Prskawetz, 2000. "Agricultural productivity growth and escape from the Malthusian trap," MPIDR Working Papers WP-2000-002, Max Planck Institute for Demographic Research, Rostock, Germany.
  15. Au, Chun-Chung & Henderson, J. Vernon, 2006. "How migration restrictions limit agglomeration and productivity in China," Journal of Development Economics, Elsevier, vol. 80(2), pages 350-388, August.
  16. Hayami, Yujiro & Ruttan, Vernon W, 1970. "Agricultural Productivity Differences Among Countries," American Economic Review, American Economic Association, vol. 60(5), pages 895-911, December.
  17. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
  18. Jolliffe, Dean, 2004. "The impact of education in rural Ghana: examining household labor allocation and returns on and off the farm," Journal of Development Economics, Elsevier, vol. 73(1), pages 287-314, February.
  19. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
  20. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
  21. Williamson, Jeffrey G, 1987. "Did English Factor Markets Fail during the Industrial Revolution?," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 641-78, December.
  22. repec:fth:stanho:e-92-3 is not listed on IDEAS
  23. Diego Restuccia, 2004. "Barriers to Capital Accumulation and Aggregate Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 225-238, 02.
  24. Yang, Dennis T. & Hao Zhou, 1997. "Rural-Urban Disparity and Sectoral Labor Allocation in China," Working Papers 97-02, Duke University, Department of Economics.
  25. Jonathan Temple, 2005. "Dual economy models: a primer for growth economists," Bristol Economics Discussion Papers 05/574, Department of Economics, University of Bristol, UK.
  26. Francesco Caselli, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
  27. Crego, Al & Larson, Donald & Butzer, Rita & Mundlak, Yair, 1998. "A new database on investment and capital for agriculture and manufacturing," Policy Research Working Paper Series 2013, The World Bank.
  28. Floystad, Gunnar, 1975. "Distortions in the Factor Market: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 200-213, May.
  29. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  30. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-23, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:88:y:2009:i:2:p:325-334. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.