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Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis

Author

Listed:
  • Stephen Ayerst
  • Loren Brandt
  • Diego Restuccia

Abstract

In less developed economies, the allocation of factor inputs to more productive farms is often hindered. To analyze how distortions affect farm dynamics and agricultural productivity, we develop a model of heterogeneous farms investing in productivity improvements. We calibrate the model using detailed farm-level panel data from Vietnam, exploiting regional differences in agricultural institutions. We focus on southern Vietnam and quantify the effect of higher measured distortions in the north. We find that the higher distortions in the north reduce agricultural productivity by 38 percent, accounting for 55 percent of the observed 2.5-fold difference between regions.

Suggested Citation

  • Stephen Ayerst & Loren Brandt & Diego Restuccia, 2026. "Distortions, Producer Dynamics, and Aggregate Productivity: A General Equilibrium Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 18(4), pages 134-162, October.
    • Handle: RePEc:aea:aejmac:v:18:y:2026:i:4:p:134-62
    DOI: 10.1257/mac.20240526
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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
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • 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
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • P32 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Collectives; Communes; Agricultural Institutions
    • 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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