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Transportation Costs, Agricultural Productivity, And Cross‐Country Income Differences

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  • Tasso Adamopoulos

Abstract

There are large differences in transportation infrastructure across nations. Constructing a measure of transportation infrastructure density for a large set of countries, I show that the disparity in this measure between the 5% income rich and the 5% income poor countries is a factor of 28. Are these differences a source of productivity differences across nations? Using a three-sector, two-region, general equilibrium model, I show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non-agriculture. Taking as given the observed differences in transportation infrastructure densities, I quantify the role of transportation for cross-country income differences. The calibrated model produces an income disparity of 10.9 between the 5% rich and 5% poor countries. This corresponds to an improvement of 35% relative to the disparity predicted by a two sector model of agriculture and non-agriculture. Furthermore, the effects of advancements in transportation are non-linear: the elasticity of aggregate labor productivity with respect to the stock of transportation infrastructure in the poorest nations is 15 times higher than in the richest ones
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Suggested Citation

  • Tasso Adamopoulos, 2011. "Transportation Costs, Agricultural Productivity, And Cross‐Country Income Differences," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 489-521, May.
  • Handle: RePEc:ier:iecrev:v:52:y:2011:i:2:p:489-521
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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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