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Heterogeneous technology and panel data: The case of the agricultural production function

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  • Mundlak, Yair
  • Butzer, Rita
  • Larson, Donald F.

Abstract

Economic growth involves reallocating resources from traditional to new techniques of production, creating new relationships between particular resources and productivity. The paper analyzes the implications of this process on the estimation of agricultural production functions using a panel of countries. The data includes a measure of capital in agriculture absent from most studies. We employ a heterogeneous technology framework where implemented technology is chosen jointly with inputs to interpret information obtained in the empirical analysis of panel data. In this framework, estimates depend upon the economic environment, which is represented by state variables. It turns out that the old problem of identifying the production function cannot be resolved through the use of instrumental variables, but can be resolved using the allocation error. The paper discusses the scope for replacing country and time effects by observed state variables. The empirical results differ from those reported in the literature for cross-country studies, largely in augmenting the elasticities of capital and land and reducing those of fertilizer and labor. The evaluation of the marginal value productivity accounts for the flow of capital and fertilizer to agriculture and the flow of labor to other sectors, thereby contributing to overall economic growth.

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Bibliographic Info

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

Volume (Year): 99 (2012)
Issue (Month): 1 ()
Pages: 139-149

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Handle: RePEc:eee:deveco:v:99:y:2012:i:1:p:139-149

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Agriculture; Development; Economic growth; Panel data; Productivity;

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References

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  1. Yair MUNDLAK & Donald F. LARSON & Rita BUTZER, 1999. "Rethinking Within and Between Regressions: The Case of Agricultural Production Functions," Annales d'Economie et de Statistique, ENSAE, issue 55-56, pages 475-501.
  2. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  3. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  4. Fulginiti, Lilyan E. & Perrin, Richard K., 1992. "Prices and Productivity in Agriculture," Staff General Research Papers 543, Iowa State University, Department of Economics.
  5. Barbara J. Craig & Philip G. Pardey & Johannes Roseboom, 1997. "International Productivity Patterns: Accounting for Input Quality, Infrastructure, and Research," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1064-1076.
  6. Johnson, Paul & Durlauf, Steven N & Temple, Johnathan R. W., 2004. "Growth Econometrics," Vassar College Department of Economics Working Paper Series 61, Vassar College Department of Economics.
    • Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  7. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
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  10. Mundlak, Yair, 1993. "On the Empirical Aspects of Economic Growth Theory," American Economic Review, American Economic Association, vol. 83(2), pages 415-20, May.
  11. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  12. Larson, David F. & Butzer, Rita & Mundlak, Yair & Crego, Al, 2000. "A Cross-Country Database for Sector Investment and Capital," World Bank Economic Review, World Bank Group, vol. 14(2), pages 371-91, May.
  13. Lau, Lawrence J. & Yotopoulos, Pan A., 1989. "The meta-production function approach to technological change in world agriculture," Journal of Development Economics, Elsevier, vol. 31(2), pages 241-269, October.
  14. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  15. Mundlak, Yair, 1996. "Production Function Estimation: Reviving the Primal," Econometrica, Econometric Society, vol. 64(2), pages 431-38, March.
  16. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
  17. Evenson, Robert E & Kislev, Yoav, 1975. " Investment in Agricultural Research and Extension: A Survey of International Data," Economic Development and Cultural Change, University of Chicago Press, vol. 23(3), pages 507-21, April.
  18. Binswanger, Hans & Yang, Maw-Cheng & Bowers, Alan & Mundlak, Yair, 1987. "On the determinants of cross-country aggregate agricultural supply," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 111-131.
  19. Mundlak, Yair, 2001. "Production and supply," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 1, pages 3-85 Elsevier.
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Citations

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Cited by:
  1. Petrick, Martin & Kloss, Mathias, 2013. "Identifying Factor Productivity from Micro-data: The case of EU agriculture," Working Papers 144004, Factor Markets, Centre for European Policy Studies.
  2. Markus Eberhardt & Dietrich Vollrath, 2014. "Agricultural Technology and Structural Change," CSAE Working Paper Series 2014-21, Centre for the Study of African Economies, University of Oxford.
  3. Markus Eberhardt & Andrea Filippo Presbitero, 2013. "This Time They're Different: Heterogeneity;and Nonlinearity in the Relationship;between Debt and Growth," Mo.Fi.R. Working Papers 92, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  4. Larson, Donald F. & Gurara, Daniel Zerfu, 2013. "A conceptual model of incomplete markets and the consequences for technology adoption policies in Ethiopia," Policy Research Working Paper Series 6681, The World Bank.
  5. Butzer, Rita & Mundlak, Yair & Larson, Donald F., 2010. "Measures of fixed capital in agriculture," Policy Research Working Paper Series 5472, The World Bank.
  6. Larson, Donald F. & Otsuka, Keijiro & Matsumoto, Tomoya & Kilic, Talip, 2012. "Should African rural development strategies depend on smallholder farms ? an exploration of the inverse productivity hypothesis," Policy Research Working Paper Series 6190, The World Bank.
  7. Markus Eberhardt & Francis Teal, 2009. "A Common Factor Approach to Spatial Heterogeneity in Agricultural Productivity Analysis," CSAE Working Paper Series 2009-05, Centre for the Study of African Economies, University of Oxford.
  8. Allen, Summer L. & Badiane, Ousmane & Ulimwengu, John M., 2012. "Government Expenditures, Social Outcomes, and Marginal Productivity of Agricultural Inputs: A Case Study for Tanzania," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126663, International Association of Agricultural Economists.
  9. Margaret S. McMillan & Dani Rodrik, 2011. "Globalization, Structural Change and Productivity Growth," NBER Working Papers 17143, National Bureau of Economic Research, Inc.
  10. Gaaitzen J. de Vries & Abdul A. Erumban & Marcel P. Timmer & Ilya B. Voskoboynikov & Harry X. Wu, 2011. "Deconstructing The BRICs: Structural Transformation And Aggregate Productivity Growth," HSE Working papers WP BRP 04/EC/2011, National Research University Higher School of Economics.
  11. Petrick, Martin & Kloss, Mathias, 2013. "Synthesis Report on the Impact of Capital Use," Working Papers 157116, Factor Markets, Centre for European Policy Studies.
  12. Petrick, Martin & Kloss, Mathias, 2013. "Identifying Factor Productivity by Dynamic Panel Data and Control Function Approaches: A Comparative Evaluation for EU Agriculture," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156104, German Association of Agricultural Economists (GEWISOLA).
  13. Amarender A, Reddy, 2013. "Farm profitability and Labour Use Efficiency," MPRA Paper 52790, University Library of Munich, Germany.

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