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Heterogeneity, Measurement Error, and Misallocation: Evidence from African Agriculture

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  • Gollin, Douglas
  • Udry, Christopher

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.

Suggested Citation

  • Gollin, Douglas & Udry, Christopher, 2019. "Heterogeneity, Measurement Error, and Misallocation: Evidence from African Agriculture," CEPR Discussion Papers 13433, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13433
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    More about this item

    Keywords

    Agricultural productivity; Misallocation; Productivity measurement; Firm productivity dispersion; Agricultural development; Agricultural production function estimation;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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