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

Listed author(s):
  • Tasso Adamopoulos
  • Loren Brandt
  • Jessica Leight
  • Diego Restuccia

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.

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File URL: https://www.economics.utoronto.ca/public/workingPapers/tecipa-574.pdf
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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-574.

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Length: Unknown pages
Date of creation: 03 Jan 2017
Handle: RePEc:tor:tecipa:tecipa-574
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  1. Diego Restuccia & Raul Santaeulalia-Llopis, 2015. "Land Misallocation and Productivity," Working Papers tecipa-541, University of Toronto, Department of Economics.
  2. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
  3. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March.
  4. Tasso Adamopoulos & Diego Restuccia, 2014. "Land Reform and Productivity: A Quantitative Analysis with Micro Data," Working Papers tecipa-525, University of Toronto, Department of Economics.
  5. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
  6. Tasso Adamopoulos & Diego Restuccia, 2014. "The Size Distribution of Farms and International Productivity Differences," American Economic Review, American Economic Association, vol. 104(6), pages 1667-1697, June.
  7. Ngai, Liwa Rachel & Pissarides, Christopher & Wang, Jin, 2016. "China's mobility barriers and employment allocations," CEPR Discussion Papers 11657, C.E.P.R. Discussion Papers.
  8. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  9. Charles Gottlieb & Jan Grobovsek, 2015. "Communal Land and Agricultural Productivity," 2015 Meeting Papers 1513, Society for Economic Dynamics.
  10. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
  11. Diego Restuccia & Richard Rogerson, 2012. "Misallocation and Productivity," Working Papers tecipa-468, University of Toronto, Department of Economics.
  12. Trevor Tombe & Xiaodong Zhu, 2015. "Trade, Migration and Productivity: A Quantitative Analysis of China," Working Papers tecipa-542, University of Toronto, Department of Economics.
  13. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
  14. Chaoran Chen, 2014. "Untitled Land, Occupational Choice, and Agricultural Productivity," Working Papers tecipa-513, University of Toronto, Department of Economics.
  15. Loren Brandt & Trevor Tombe & Xiaodong Zhu, 2012. "Factor Market Distortions across Time, Space and Sectors in China," Working Papers 262012, Hong Kong Institute for Monetary Research.
  16. 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.
  17. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  18. Loren Brandt & Trevor Tombe & Xiadong Zhu, 2012. "Online Appendix to "Factor Market Distortions Across Time, Space, and Sectors in China"," Technical Appendices 11-95, Review of Economic Dynamics.
  19. Alain de Janvry & Kyle Emerick & Marco Gonzalez-Navarro & Elisabeth Sadoulet, 2015. "Delinking Land Rights from Land Use: Certification and Migration in Mexico," American Economic Review, American Economic Association, vol. 105(10), pages 3125-3149, October.
  20. Loren Brandt & Dwayne Benjamin, 2002. "Property Rights, Labour Markets, and Efficiency in a Transition Economy: The Case of Rural China," William Davidson Institute Working Papers Series 518, William Davidson Institute at the University of Michigan.
  21. David Lagakos & Michael E. Waugh, 2013. "Selection, Agriculture, and Cross-Country Productivity Differences," American Economic Review, American Economic Association, vol. 103(2), pages 948-980, April.
  22. Tao Yang, Dennis, 1997. "China's land arrangements and rural labor mobility," China Economic Review, Elsevier, vol. 8(2), pages 101-115.
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