Specialization, Economic Development and Aggregate Productivity Differences
Cross-country labor productivity differences are large in agriculture and much smaller in non-agriculture. We argue that these relative productivity differences arise when subsistence consumption needs prevent workers in poor countries from specializing in the sector in which they are most productive. We formalize our theory by embedding the Roy (1951) model of ability into a two-sector general-equilibrium growth model in which the agents’ preferences feature a subsistence food requirement. The model predicts that productivity differences in agriculture will be relatively larger than in non-agriculture, even though countries differ only in a sector-neutral efficiency term. A parameterized version of our model suggests that our theory is quantitatively important in explaining why agriculture productivity differences are so large relative to those in non-agriculture.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
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- Diego Restuccia & Dennis Tao Yang & Xiaodong Zhu, 2007.
"Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis,"
e07-3, Virginia Polytechnic Institute and State University, Department of Economics.
- 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.
- Diego Restuccia & Dennis Tao Yang & Xiaodong Zhu, 2003. "Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis," Working Papers diegor-03-01, University of Toronto, Department of Economics.
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