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Misallocation in Indian Agriculture

Author

Listed:
  • Marijn Bolhuis
  • Swapnika Rachapalli
  • Diego Restuccia

Abstract

We exploit substantial variation in land-market institutions across Indian states and detailed household-level panel data to assess the effect of land-market distortions on agricultural productivity. We develop a model of heterogeneous farms and distorted land markets, featuring (i) state-level barriers to land-market participation and (ii) idiosyncratic (farm-level) distortions to farm size. We separately identify and estimate the two sources of land-market distortions in each state. We find substantial differences across states in rental barriers with large negative effects on agricultural productivity. Distortions associated with land-market participation contribute substantially to agricultural productivity differences across Indian states.

Suggested Citation

  • Marijn Bolhuis & Swapnika Rachapalli & Diego Restuccia, 2026. "Misallocation in Indian Agriculture," American Economic Journal: Macroeconomics, American Economic Association, vol. 18(2), pages 378-408, April.
    • Handle: RePEc:aea:aejmac:v:18:y:2026:i:2:p:378-408
    DOI: 10.1257/mac.20210358
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • 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
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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