IDEAS home Printed from https://ideas.repec.org/a/eee/moneco/v55y2008i2p234-250.html
   My bibliography  Save this article

Agriculture and aggregate productivity: A quantitative cross-country analysis

Author

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

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:moneco:v:55:y:2008:i:2:p:234-250
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-3932(07)00148-1
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rosenzweig, Mark R., 1988. "Labor markets in low-income countries," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 15, pages 713-762, Elsevier.
    2. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    3. King, Robert G. & Levine, Ross, 1994. "Capital fundamentalism, economic development, and economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 259-292, June.
    4. McGrattan, Ellen R. & Schmitz, James Jr., 1999. "Explaining cross-country income differences," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 10, pages 669-737, Elsevier.
    5. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December.
    6. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2007. "The food problem and the evolution of international income levels," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1230-1255, May.
    7. Douglas Gollin & Stephen L. Parente & Richard Rogerson, 2004. "Farm Work, Home Work, and International Productivity Differences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 827-850, October.
    8. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
    9. Rodolfo E. Manuelli & Ananth Seshadri, 2014. "Frictionless Technology Diffusion: The Case of Tractors," American Economic Review, American Economic Association, vol. 104(4), pages 1368-1391, April.
    10. Crego, Al & Larson, Donald & Butzer, Rita & Mundlak, Yair, 1998. "A new database on investment and capital for agriculture and manufacturing," Policy Research Working Paper Series 2013, The World Bank.
    11. Robert E. Lucas, 2000. "Some Macroeconomics for the 21st Century," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 159-168, Winter.
    12. Masao Ogaki & Andrew Atkeson, 1997. "Rate Of Time Preference, Intertemporal Elasticity Of Substitution, And Level Of Wealth," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 564-572, November.
    13. Goodfriend, Marvin & McDermott, John, 1995. "Early Development," American Economic Review, American Economic Association, vol. 85(1), pages 116-133, March.
    14. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
    15. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    16. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
    17. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    18. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, vol. 75(3), pages 781-836, May.
    19. Areendam Chanda & Carl-Johan Dalgaard, 2003. "Dual Economies and International Total Factor Productivity Differences," Macroeconomics 0305002, University Library of Munich, Germany.
    20. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    21. Casey B. Mulligan, 2002. "A Century of Labor-Leisure Distortions," NBER Working Papers 8774, National Bureau of Economic Research, Inc.
    22. Eswaran, Mukesh & Kotwal, Ashok, 2002. "The role of the service sector in the process of industrialization," Journal of Development Economics, Elsevier, vol. 68(2), pages 401-420, August.
    23. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-452, May.
    24. Stokey, Nancy L., 2001. "A quantitative model of the British industrial revolution, 1780-1850," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 55-109, December.
    25. Ngai, L. Rachel, 2004. "Barriers and the transition to modern growth," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1353-1383, October.
    26. Hayami, Yujiro & Ruttan, Vernon W, 1970. "Agricultural Productivity Differences Among Countries," American Economic Review, American Economic Association, vol. 60(5), pages 895-911, December.
    27. Casey B. Mulligan, 2002. "A Dual Method of Empirically Evaluating Dynamic Competitive Equilibrium Models with Market Distortions, Applied to the Great Depression & World War II," NBER Working Papers 8775, National Bureau of Economic Research, Inc.
    28. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 5266, London School of Economics and Political Science, LSE Library.
    29. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "The Poverty of Nations: A Quantitative Exploration," NBER Working Papers 5414, National Bureau of Economic Research, Inc.
    30. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    31. Atkeson, Andrew & Ogaki, Masao, 1996. "Wealth-varying intertemporal elasticities of substitution: Evidence from panel and aggregate data," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 507-534, December.
    32. Sergio Rebelo & Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    33. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
    34. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
    35. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Relative Prices and Relative Prosperity," American Economic Review, American Economic Association, vol. 97(3), pages 562-585, June.
    36. Mundlak, Yair, 2001. "Production and supply," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 1, pages 3-85, Elsevier.
    37. Johnson, D Gale, 1997. "Agriculture and the Wealth of Nations," American Economic Review, American Economic Association, vol. 87(2), pages 1-12, May.
    38. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
    39. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114, National Bureau of Economic Research, Inc.
    40. John Laitner, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 545-561.
    41. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, September.
    42. Love, David R. F., 1997. "A dynamic general equilibrium model of industrialization when manufactures are unnecessary," Journal of Development Economics, Elsevier, vol. 54(2), pages 357-385, December.
    43. Peter Timmer, C., 1988. "The agricultural transformation," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 8, pages 275-331, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Chen, Chaoran, 2020. "Technology adoption, capital deepening, and international productivity differences," Journal of Development Economics, Elsevier, vol. 143(C).
    3. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2007. "The food problem and the evolution of international income levels," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1230-1255, May.
    4. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
    5. Douglas Gollin & Stephen L. Parente & Richard Rogerson, 2004. "Farm Work, Home Work, and International Productivity Differences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 827-850, October.
    6. Yang, Dennis Tao & Zhu, Xiaodong, 2013. "Modernization of agriculture and long-term growth," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 367-382.
    7. John S. Landon‐Lane & Peter E. Robertson, 2009. "Factor Accumulation And Growth Miracles In A Two‐Sector Neoclassical Growth Model," Manchester School, University of Manchester, vol. 77(2), pages 153-170, March.
    8. Areendam Chanda & Carl-Johan Dalgaard, 2003. "Dual Economies and International Total Factor Productivity Differences," Macroeconomics 0305002, University Library of Munich, Germany.
    9. Dietrich Vollrath, 2009. "The dual economy in long-run development," Journal of Economic Growth, Springer, vol. 14(4), pages 287-312, December.
    10. Herrendorf, Berthold & Teixeira, Arilton, 2003. "Monopoly Rights can Reduce Income Big Time," CEPR Discussion Papers 3854, C.E.P.R. Discussion Papers.
    11. Bah, El-hadj M., 2007. "A Three-Sector Model of Structural Transformation and Economic Development," MPRA Paper 10654, University Library of Munich, Germany, revised 19 Sep 2008.
    12. Diego Restuccia, 2004. "Barriers to Capital Accumulation and Aggregate Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 225-238, February.
    13. Jonathan Temple & Ludger Wößmann, 2006. "Dualism and cross-country growth regressions," Journal of Economic Growth, Springer, vol. 11(3), pages 187-228, September.
    14. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    15. Antonio Saravia & Carlos Gustavo Machicado & Felix Rioja, 2014. "Productivity, Structural Change and Latin American Development," Review of Development Economics, Wiley Blackwell, vol. 18(3), pages 610-624, August.
    16. Ngai, L. Rachel, 2004. "Barriers and the transition to modern growth," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1353-1383, October.
    17. Berthold Herrendorf & Arilton Teixeira, 2011. "Barriers To Entry And Development," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 573-602, May.
    18. Jonathan Temple, 2005. "Dual Economy Models: A Primer For Growth Economists," Manchester School, University of Manchester, vol. 73(4), pages 435-478, July.
    19. Rui Castro, 2005. "Economic Development and Growth in the World Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 195-230, January.
    20. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.

    More about this item

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Canadian Macro Study Group

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:55:y:2008:i:2:p:234-250. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nithya Sathishkumar). General contact details of provider: http://www.elsevier.com/locate/inca/505566 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.