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Land Misallocation and Productivity

Author

Listed:
  • Raul Santaeulalia-Llopis

    (Washington University in St. Louis)

  • Diego Restuccia

    (University of Toronto)

Abstract

We assess the importance of land misallocation for productivity in agriculture using a quantitative model and detailed household-level data from Malawi. The land market is largely underdeveloped in Malawi as the vast majority of land is transmitted by inheritance, almost none of the land is purchased with a title, and a very small portion of operated land is rented. Moreover, the land distribution in Malawi is fairly concentrated at extremely small operational scales, with more than 70 percent of all farmers operating less than 2 acres of land. Using the micro data, we estimate the distribution of farmer's productivity and the wedges that rationalize the actual distribution of farm sizes in the context of a standard model of farm size with endogenous farm-level productivity. The micro data indicates that while the distribution of farmers productivity approximates a log normal with substantial dispersion, land is spread among farmers at very low operational scales. Under the counterfactual that land is reallocated via a land market to the best productive uses, we find an increase in agricultural productivity of a factor of 4-fold. This result emphasizes the importance of land market efficiency for productivity and suggest that land misallocation may be at the core of the large real productivity differences in agriculture across countries.

Suggested Citation

  • Raul Santaeulalia-Llopis & Diego Restuccia, 2014. "Land Misallocation and Productivity," 2014 Meeting Papers 1314, Society for Economic Dynamics.
  • Handle: RePEc:red:sed014:1314
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. De Magalhães, Leandro & Santaeulàlia-Llopis, Raül, 2018. "The consumption, income, and wealth of the poorest: An empirical analysis of economic inequality in rural and urban Sub-Saharan Africa for macroeconomists," Journal of Development Economics, Elsevier, vol. 134(C), pages 350-371.
    2. Brandt Loren & Syerst Stephen & Restuccia Diego & Ayerst Stephen, 2018. "Market constraints, misallocation, and productivity in Viet Nam agriculture," WIDER Working Paper Series 114, World Institute for Development Economic Research (UNU-WIDER).
    3. Shenoy, Ajay, 2017. "Market failures and misallocation," Journal of Development Economics, Elsevier, vol. 128(C), pages 65-80.
    4. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    5. Klaus Deininger & Songqing Jin & Yanyan Liu & Sudhir K Singh, 2016. "Can Labor Market Imperfections Explain Changes in the Inverse Farm Size–Productivity Relationship? Longitudinal Evidence from Rural India," Working Papers id:10987, eSocialSciences.
    6. Tasso Adamopoulos & Loren Brandt & Jessica Leight & Diego Restuccia, 2017. "Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China," Working Papers tecipa-593, University of Toronto, Department of Economics.
    7. Diego Restuccia, 2013. "The Latin American Development Problem: An Interpretation," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 69-108, January.
    8. Emran, M. Shahe & Shilpi, Forhad, 2015. "Do Land Market Restrictions Hinder Structural Change in a Rural Economy? Evidence from Sri Lanka," MPRA Paper 66017, University Library of Munich, Germany.
    9. Gottlieb, Charles & Grobovšek, Jan, 2019. "Communal land and agricultural productivity," Journal of Development Economics, Elsevier, vol. 138(C), pages 135-152.
    10. Diego Restuccia, 2019. "Misallocation and aggregate productivity across time and space," Canadian Journal of Economics, Canadian Economics Association, vol. 52(1), pages 5-32, February.
    11. Chaoran Chen, 2017. "Technology Adoption, Capital Deepening, and International Productivity Differences," Working Papers tecipa-584, University of Toronto, Department of Economics.
    12. repec:bdr:ensayo:y:2019:i:89:p:1-54 is not listed on IDEAS
    13. Marina Mendes Tavares & Diego Restuccia & Jose-Maria Da-Rocha, 2014. "Policy Distortions and Aggregate Productivity with Endogenous Establishment-Level Productivity," 2014 Meeting Papers 1196, Society for Economic Dynamics.
    14. repec:col:000107:017142 is not listed on IDEAS
    15. Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2015. "The misallocation of land and other factors of production in India," Policy Research Working Paper Series 7221, The World Bank.
    16. Diego Restuccia & Tasso Adamopoulos, 2012. "Land Reform and Productivity: A Quantitative Analysis with Micro Data," 2012 Meeting Papers 1083, Society for Economic Dynamics.
    17. repec:cep:stieop:58 is not listed on IDEAS
    18. Deininger, Klaus W. & Xia, Fang, 2017. "Assessing Impacts of Large Scale Land Transfers: Challenges and Opportunities in Malawi’s Estate Sector," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258112, Agricultural and Applied Economics Association.
    19. Hernandez, M. & Britos, B. & Robles, M. & Trupkin, D., 2018. "Land market distortions: Theory and evidence from Guatemala," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277031, International Association of Agricultural Economists.
    20. Deininger, Klaus & Savastano, Sara & Xia, Fang, 2017. "Smallholders’ land access in Sub-Saharan Africa: A new landscape?," Food Policy, Elsevier, vol. 67(C), pages 78-92.
    21. Cesar Blanco & Xavier Raurich, 2018. "Agricultural Composition, Structural Change and Labor Productivity," 2018 Meeting Papers 772, Society for Economic Dynamics.
    22. Burchardi, Konrad B. & Gulesci, Selim & Lerva, Benedetta & Sulaiman, Munshi, 2017. "Moral Hazard: Experimental Evidence from Tenancy Contracts," CEPR Discussion Papers 12232, C.E.P.R. Discussion Papers.
    23. IFPRI International Food Policy Research Institute, 2016. "Can Labour Market Imperfections Explain Changes in the Inverse Farm Size-Productivity Relationship?: Longitudinal Evidence from Rural India," Working Papers id:11007, eSocialSciences.
    24. Duranton,Gilles & Ghani,Syed Ejaz & Goswami,Arti Grover & Kerr,William Robert, 2015. "Effects of land misallocation on capital allocations in India," Policy Research Working Paper Series 7451, The World Bank.

    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

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