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A Common Factor Approach to Spatial Heterogeneity in Agricultural Productivity Analysis

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Author Info
Eberhardt, Markus
Teal, Francis

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Abstract

In this paper we investigate a `global' production function for agriculture, using FAO data for 128 countries from 1961-2002. Our review of the empirical literature in this field highlights that existing cross-country studies largely neglect variable time-series properties, parameter heterogeneity and the potential for heterogeneous Total Factor Productivity (TFP) processes across countries. We motivate the case for technology heterogeneity in agricultural production and present statistical tests indicating nonstationarity and cross-section dependence in the data. Our empirical approach deals with these difficulties by adopting the Pesaran (2006) Common Correlated Effects estimators, which we extend by using alternative weight-matrices to model the nature of the cross-section dependence. We furthermore investigate returns to scale of production and production dynamics. Our results support the specifi cation of a common factor model in intercountry production analysis, highlight the rejection of constant returns to scale in pooled models as an artefact of empirical misspeci cation and suggest that agro-climatic environment, rather than neighbourhood or distance, drives similarity in TFP evolution across countries. The latter nding provides a possible explanation for the observed failure of technology transfer from advanced countries of the temperate `North' to arid and/or equatorial developing countries of the `South'.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15810.

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Date of creation: 13 May 2009
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Handle: RePEc:pra:mprapa:15810

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Related research
Keywords: agriculture; cross-country productivity analysis; nonstationary panel econometrics; factor models;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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  6. Eberhardt, Markus & Teal, Francis, 2009. "Analysing Heterogeneity in Global Production Technology and TFP: The Case of Manufacturing," MPRA Paper 10690, University Library of Munich, Germany. [Downloadable!]
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  27. Hanck, Christoph, 2008. "Nonstationary-Volatility Robust Panel Unit Root Tests and the Great Moderation," MPRA Paper 11988, University Library of Munich, Germany. [Downloadable!]
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  30. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178. [Downloadable!] (restricted)
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  31. Larson, David F. & Butzer, Rita & Mundlak, Yair & Crego, Al, 2000. "A Cross-Country Database for Sector Investment and Capital," World Bank Economic Review, Oxford University Press, vol. 14(2), pages 371-91, May. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Eberhardt, Markus & Teal, Francis, 2009. "Econometrics for Grumblers: A New Look at the Literature on Cross-Country Growth Empirics," MPRA Paper 15813, University Library of Munich, Germany. [Downloadable!]
  2. Eberhardt, Markus & Bond, Stephen, 2009. "Cross-section dependence in nonstationary panel models: a novel estimator," MPRA Paper 17692, University Library of Munich, Germany, revised 14 Oct 2009. [Downloadable!]
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