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Agriculture and aggregate productivity: A quantitative cross-country analysis

  • Restuccia, Diego
  • Yang, Dennis Tao
  • Zhu, Xiaodong

A decomposition of aggregate labor productivity based on internationally comparable data reveals that a high share of employment and low labor productivity in agriculture are mainly responsible for low aggregate productivity in poor countries. Using a two-sector general-equilibrium model, we show that differences in economy-wide productivity, barriers to modern intermediate inputs in agriculture, and barriers in the labor market generate large cross-country differences in the share of employment and labor productivity in agriculture. The model implies a factor difference of 10.8 in aggregate labor productivity between the richest and the poorest 5% of the countries in the world, leaving the unexplained factor at 3.2. Overall, this two-sector framework performs much better than a single-sector growth model in explaining observed differences in international productivity.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): 2 (March)
Pages: 234-250

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Handle: RePEc:eee:moneco:v:55:y:2008:i:2:p:234-250
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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