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Land Misallocation and Productivity

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  • Chaoran Chen
  • Diego Restuccia
  • Raül Santaeulàlia-Llopis

Abstract

Using detailed household-level data from Malawi on physical quantities of agricultural outputs and inputs, we measure farm total factor productivity (TFP), controlling for land quality, rain, and transitory shocks. We find that operated land size and capital are essentially unrelated to farm TFP, implying substantial factor misallocation. The agricultural output gain from a reallocation of factors to their efficient use among existing farmers is a factor between 1.7- and 2.8-fold. We provide suggestive evidence connecting misallocation with the extent of land markets and illustrate how an efficient allocation via rental markets can substantially reduce agricultural income inequality and poverty.

Suggested Citation

  • Chaoran Chen & Diego Restuccia & Raül Santaeulàlia-Llopis, 2023. "Land Misallocation and Productivity," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(2), pages 441-465, April.
  • Handle: RePEc:aea:aejmac:v:15:y:2023:i:2:p:441-65
    DOI: 10.1257/mac.20170229
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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