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Transportation Costs, Agricultural Productivity and Cross-Country Income Differences

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  • Tasso Adamopoulos

    ()
    (Department of Economics York University)

Abstract

There are large differences in transportation infrastructure across nations. Constructing a measure of transportation infrastructure density for a large set of countries, I show that the disparity in this measure between the 5% income rich and the 5% income poor countries is a factor of 28. Are these differences a source of productivity differences across nations? Using a three-sector, two-region, general equilibrium model, I show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non-agriculture. Taking as given the observed differences in transportation infrastructure densities, I quantify the role of transportation for cross-country income differences. The calibrated model produces an income disparity of 10.9 between the 5% rich and 5% poor countries. This corresponds to an improvement of 35% relative to the disparity predicted by a two sector model of agriculture and non-agriculture. Furthermore, the effects of advancements in transportation are non-linear: the elasticity of aggregate labor productivity with respect to the stock of transportation infrastructure in the poorest nations is 15 times higher than in the richest ones

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 663.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:663

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Keywords: Productivity Differences; Sectoral Productivity; Transportation Costs;

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References

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  1. 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.
  2. 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.
  3. Edward L. Glaeser & Janet E. Kohlhase, 2003. "Cities, Regions and the Decline of Transport Costs," NBER Working Papers 9886, National Bureau of Economic Research, Inc.
  4. Canning, David, 1998. "A Database of World Stocks of Infrastructure, 1950-95," World Bank Economic Review, World Bank Group, vol. 12(3), pages 529-47, September.
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Cited by:
  1. Wenbiao Cai & Manish Pandey, 2013. "The Agricultural Productivity Gap in Europe," Departmental Working Papers 2013-05, The University of Winnipeg, Department of Economics.
  2. repec:fip:fedreq:y:2011:i:3q:p:329-357:n:vol.97no.3 is not listed on IDEAS
  3. Tasso Adamopoulos & Diego Restuccia, 2011. "The Size Distribution of Farms and International Productivity Differences," Working Papers tecipa-441, University of Toronto, Department of Economics.
  4. Trevor Tombe, 2012. "The Missing Food Problem," Working Papers tt0060, Wilfrid Laurier University, Department of Economics, revised 2012.
  5. Diego Restuccia, 2011. "Recent developments in economic growth," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 329-357.
  6. Nishida, Keigo, 2012. "Agricultural Productivity Differences and Credit Market Imperfections," MPRA Paper 38962, University Library of Munich, Germany.
  7. Berthold Herrendorf & James A. Schmitz & Arilton Teixeira, 2009. "Transportation and development: insights from the U.S., 1840-1860," Staff Report 425, Federal Reserve Bank of Minneapolis.
  8. Tasso Adamopoulos, 2010. "The Size Distribution of Farms and International Productivity Differences," 2010 Meeting Papers 1145, Society for Economic Dynamics.
  9. Jan Grobovsek (University of Edinburgh), 2013. "Development Accounting with Intermediate Goods," ESE Discussion Papers 223, Edinburgh School of Economics, University of Edinburgh.
  10. Trevor Tombe, 2010. "The Missing Food Problem: How Low Agricultural Imports Contribute to International Income and Productivity Differences," Working Papers tecipa-416, University of Toronto, Department of Economics.

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