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Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China

Author

Listed:
  • Loren Brandt

    (University of Toronto)

  • Jessica Leight

    (Williams College)

  • Diego Restuccia

    (University of Toronto)

  • Tasso Adamopoulos

    (York University)

Abstract

We use household-level panel data from China and a quantitative framework to document the extent and consequences of factor misallocation in agriculture. We find that there are substantial frictions in both the land and capital markets linked to land institutions in rural China that disproportionately constrain the more productive farmers. These frictions reduce aggregate agricultural productivity in China by affecting two key margins: (1) the allocation of resources across farmers (misallocation) and (2) the allocation of workers across sectors, in particular the type of farmers who operate in agriculture (selection). We show that selection can substantially amplify the static misallocation effect of distortionary policies by affecting occupational choices that worsen the distribution of productive units in agriculture.

Suggested Citation

  • Loren Brandt & Jessica Leight & Diego Restuccia & Tasso Adamopoulos, 2017. "Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China," 2017 Meeting Papers 404, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:404
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    References listed on IDEAS

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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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