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Technology Adoption, Capital Deepening, and International Productivity Differences

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  • Chaoran Chen

    (University of Toronto)

Abstract

Cross-country differences in capital intensity are larger in the agricultural sector than in the non-agricultural sector, indicating that rich and poor countries differ in agricultural technology adoption. I build a two-sector general equilibrium model featuring technology adoption in agriculture. As the economy develops, farmers gradually adopt a modern capital-intensive technology to replace the traditional labour-intensive technology, as is observed in the U.S. historical data. Using this model, I find that the technology adoption channel is key to accounting for low agricultural capital intensity and labour productivity in poor countries. In the model, measured aggregate factors – land endowment, economy-wide productivity, and barriers to investment – can explain 1.56-fold more in rich-poor agricultural productivity differences compared to a model without technology adoption. I further show that land market frictions in agriculture impede technology adoption and magnify productivity differences.

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  • Chaoran Chen, 2017. "Technology Adoption, Capital Deepening, and International Productivity Differences," 2017 Meeting Papers 9, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:9
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    Cited by:

    1. Chaoran Chen & Diego Restuccia & Raul Santaeulalia-Llopis, 2022. "The Effects of Land Markets on Resource Allocation and Agricultural Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 45, pages 41-54, July.
    2. Kjetil Storesletten & Bo Zhao & Fabrizio Zilibotti, 2019. "Business Cycle during Structural Change: Arthur Lewis' Theory from a Neoclassical Perspective," NBER Working Papers 26181, National Bureau of Economic Research, Inc.
    3. Raul Santaeulalia-Llopis & Diego Restuccia, 2014. "Land Misallocation and Productivity," 2014 Meeting Papers 1314, Society for Economic Dynamics.
    4. Tasso Adamopoulos & Diego Restuccia, 2020. "Land Reform and Productivity: A Quantitative Analysis with Micro Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(3), pages 1-39, July.
    5. Nancy Stokey, 2020. "Technology Diffusion," Working Papers 2020-94, Becker Friedman Institute for Research In Economics.
    6. Christoph Scherrer, 2018. "The Disrupted Passage from an Agrarian Rural to an Industrial Urban Workforce in Most Countries in the Global South," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 7(3), pages 301-319, December.
    7. Tasso Adamopoulos & Loren Brandt & Chaoran Chen & Diego Restuccia & Xiaoyun Wei, 2022. "Land Security and Mobility Frictions," Working Papers tecipa-717, University of Toronto, Department of Economics.
    8. Rivera-Padilla, Alberto, 2020. "Crop choice, trade costs, and agricultural productivity," Journal of Development Economics, Elsevier, vol. 146(C).
    9. Nancy Stokey, 2021. "Technology Diffusion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 15-36, October.
    10. Nancy Stokey, 2020. "Technology Diffusion," NBER Working Papers 27466, National Bureau of Economic Research, Inc.
    11. Cesar Blanco & Xavier Raurich, 2018. "Agricultural Composition, Structural Change and Labor Productivity," 2018 Meeting Papers 772, Society for Economic Dynamics.
    12. Chen, Chaoran, 2020. "Capital-skill complementarity, sectoral labor productivity, and structural transformation," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    13. Dai, Xiaoyong & Cheng, Liwei, 2019. "Aggregate productivity losses from factor misallocation across Chinese manufacturing firms," Economic Systems, Elsevier, vol. 43(1), pages 30-41.
    14. Gillman, Max, 2021. "Steps in industrial development through human capital deepening," Economic Modelling, Elsevier, vol. 99(C).

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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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