IDEAS home Printed from https://ideas.repec.org/p/tor/tecipa/tecipa-575.html
   My bibliography  Save this paper

Land Misallocation and Productivity

Author

Listed:
  • Diego Restuccia
  • Raul Santaeulalia-Llopis

Abstract

Using detailed household-level data from Malawi on physical quantities of outputs and inputs in agricultural production, we measure total factor productivity (TFP) for farms controlling for land quality, rain, and other transitory shocks. We find that operated land size and capital are essentially unrelated to farm TFP implying substantial factor misallocation. The aggregate agricultural output gain from a reallocation of factors to their efficient use among existing farmers is a factor of 3.6-fold. We directly link factor misallocation to severely restricted land markets as the vast majority of land is allocated by village chiefs and not marketed. In particular, the output gain from reallocation are 2.6 times larger for farms with no marketed land than for farms that only operate marketed land.

Suggested Citation

  • Diego Restuccia & Raul Santaeulalia-Llopis, 2017. "Land Misallocation and Productivity," Working Papers tecipa-575, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-575
    as

    Download full text from publisher

    File URL: https://www.economics.utoronto.ca/public/workingPapers/tecipa-575.pdf
    File Function: Main Text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Pedro Bento & Diego Restuccia, 2017. "Misallocation, Establishment Size, and Productivity," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(3), pages 267-303, July.
    3. J. Behrman & T.N. Srinivasan (ed.), 1995. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 3, number 4.
    4. Binswanger, Hans P, 1974. "The Measurement of Technical Change Biases with Many Factors of Production," American Economic Review, American Economic Association, vol. 64(6), pages 964-976, December.
    5. 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.
    6. 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.
    7. 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.
    8. Douglas Gollin & David Lagakos & Michael E. Waugh, 2014. "Agricultural Productivity Differences across Countries," American Economic Review, American Economic Association, vol. 104(5), pages 165-170, May.
    9. Gino Gancia & Fabrizio Zilibotti, 2009. "Technological Change and the Wealth of Nations," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 93-120, May.
    10. John Gibson & Kathleen Beegle & Joachim De Weerdt & Jed Friedman, 2015. "What does Variation in Survey Design Reveal about the Nature of Measurement Errors in Household Consumption?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(3), pages 466-474, June.
    11. Udry, Christopher, 1996. "Gender, Agricultural Production, and the Theory of the Household," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1010-1046, October.
    12. Besley, Timothy & Ghatak, Maitreesh, 2010. "Property Rights and Economic Development," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4525-4595, Elsevier.
    13. 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.
    14. Bold, Tessa & Kaizzi, Kayuki & Svensson, Jakob & Yanagizawa-Drott, David, 2015. "Low Quality, Low Returns, Low Adoption: Evidence from the Market for Fertilizer and Hybrid Seed in Uganda," CEPR Discussion Papers 10743, C.E.P.R. Discussion Papers.
    15. Leandro De Magalhães & Raül Santaeulàlia-Llopis, 2015. "The Consumption, Income, and Wealth of the Poorest: Cross-Sectional Facts of Rural and Urban Sub-Saharan Africa for Macroeconomists," Bristol Economics Discussion Papers 15/655, School of Economics, University of Bristol, UK.
    16. Shaban, Radwan Ali, 1987. "Testing between Competing Models of Sharecropping," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 893-920, October.
    17. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2014. "Macro-perspective on Asset Grants Programs: Occupational and Wealth Mobility," American Economic Review, American Economic Association, vol. 104(5), pages 159-164, May.
    18. de Nicola, Francesca & Giné, Xavier, 2014. "How accurate are recall data? Evidence from coastal India," Journal of Development Economics, Elsevier, vol. 106(C), pages 52-65.
    19. Raül Santaeulàlia-Llopis & Yu Zheng, 2018. "The Price of Growth: Consumption Insurance in China 1989–2009," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(4), pages 1-35, October.
    20. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    21. De Magalhães, Leandro & Koh, Dongya & Santaeulàlia-Llopis, Räul, 2019. "The costs of consumption smoothing: less schooling and less nutrition," Journal of Demographic Economics, Cambridge University Press, vol. 85(3), pages 181-208, September.
    22. Beegle, Kathleen & Carletto, Calogero & Himelein, Kristen, 2012. "Reliability of recall in agricultural data," Journal of Development Economics, Elsevier, vol. 98(1), pages 34-41.
    23. Carletto, Calogero & Savastano, Sara & Zezza, Alberto, 2013. "Fact or artifact: The impact of measurement errors on the farm size–productivity relationship," Journal of Development Economics, Elsevier, vol. 103(C), pages 254-261.
    24. Arthi, Vellore & Beegle, Kathleen & De Weerdt, Joachim & Palacios-López, Amparo, 2018. "Not your average job: Measuring farm labor in Tanzania," Journal of Development Economics, Elsevier, vol. 130(C), pages 160-172.
    25. Hugo A. Hopenhayn, 2014. "Firms, Misallocation, and Aggregate Productivity: A Review," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 735-770, August.
    26. Tasso Adamopoulos & Loren Brandt & Jessica Leight & Diego Restuccia, 2022. "Misallocation, Selection, and Productivity: A Quantitative Analysis With Panel Data From China," Econometrica, Econometric Society, vol. 90(3), pages 1261-1282, May.
    27. Deon Filmer & Lant Pritchett, 2001. "Estimating Wealth Effects Without Expenditure Data—Or Tears: An Application To Educational Enrollments In States Of India," Demography, Springer;Population Association of America (PAA), vol. 38(1), pages 115-132, February.
    28. Gottlieb, Charles & Grobovšek, Jan, 2019. "Communal land and agricultural productivity," Journal of Development Economics, Elsevier, vol. 138(C), pages 135-152.
    29. Binswanger, Hans P. & Deininger, Klaus & Feder, Gershon, 1995. "Power, distortions, revolt and reform in agricultural land relations," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 42, pages 2659-2772, Elsevier.
    30. 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.
    31. J. Behrman & T.N. Srinivasan (ed.), 1995. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 3, number 3.
    32. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
    33. Diego Restuccia, 2013. "factor misallocation and development," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    34. Fernando Aragon & Diego Restuccia & Juan Pablo Rud, 2022. "Assessing misallocation in agriculture: plots versus farms," Working Papers tecipa-718, University of Toronto, Department of Economics.
    35. Bick, Alexander & Fuchs-Schündeln, Nicola & Lagakos, David, 2016. "How do Average Hours Worked Vary with Development? Cross-Country Evidence and Implications," CEPR Discussion Papers 11092, C.E.P.R. Discussion Papers.
    36. Virgiliu Midrigan & Daniel Yi Xu, 2014. "Finance and Misallocation: Evidence from Plant-Level Data," American Economic Review, American Economic Association, vol. 104(2), pages 422-458, February.
    37. Markus Goldstein & Christopher Udry, 2008. "The Profits of Power: Land Rights and Agricultural Investment in Ghana," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 981-1022, December.
    38. Desiere, Sam & Jolliffe, Dean, 2018. "Land productivity and plot size: Is measurement error driving the inverse relationship?," Journal of Development Economics, Elsevier, vol. 130(C), pages 84-98.
    39. Chen, Chaoran, 2020. "Technology adoption, capital deepening, and international productivity differences," Journal of Development Economics, Elsevier, vol. 143(C).
    40. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
    41. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
    42. Donald F. Larson & Keijiro Otsuka & Tomoya Matsumoto & Talip Kilic, 2014. "Should African rural development strategies depend on smallholder farms? An exploration of the inverse-productivity hypothesis," Agricultural Economics, International Association of Agricultural Economists, vol. 45(3), pages 355-367, May.
    43. Besley, Timothy & Ghatak, Maitreesh, 2009. "The de Soto effect," LSE Research Online Documents on Economics 25429, London School of Economics and Political Science, LSE Library.
    44. Diego Restuccia & Richard Rogerson, 2013. "Misallocation and productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 1-10, January.
    45. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
    46. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    47. Chaoran Chen, 2017. "Untitled Land, Occupational Choice, and Agricultural Productivity," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(4), pages 91-121, October.
    48. Alexander Bick & Nicola Fuchs-Schündeln & David Lagakos, 2018. "How Do Hours Worked Vary with Income? Cross-Country Evidence and Implications," American Economic Review, American Economic Association, vol. 108(1), pages 170-199, January.
    49. 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.
    50. Mu-Jeung Yang, 2021. "Micro-level Misallocation and Selection," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 341-368, October.
    51. David B Lobell & George Azzari & Marshall Burke & Sydney Gourlay & Zhenong Jin & Talip Kilic & Siobhan Murray, 2020. "Eyes in the Sky, Boots on the Ground: Assessing Satellite‐ and Ground‐Based Approaches to Crop Yield Measurement and Analysis," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(1), pages 202-219, January.
    52. 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.
    53. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552, Elsevier.
    54. David McKenzie, 2005. "Measuring inequality with asset indicators," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(2), pages 229-260, June.
    55. Deininger, Klaus & Carletto, Calogero & Savastano, Sara & Muwonge, James, 2012. "Can diaries help in improving agricultural production statistics? Evidence from Uganda," Journal of Development Economics, Elsevier, vol. 98(1), pages 42-50.
    56. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-937, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Douglas Gollin & Christopher Udry, 2021. "Heterogeneity, Measurement Error, and Misallocation: Evidence from African Agriculture," Journal of Political Economy, University of Chicago Press, vol. 129(1), pages 1-80.
    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. 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.
    6. Chen, Chaoran, 2020. "Technology adoption, capital deepening, and international productivity differences," Journal of Development Economics, Elsevier, vol. 143(C).
    7. Le, Kien, 2020. "Land use restrictions, misallocation in agriculture, and aggregate productivity in Vietnam," Journal of Development Economics, Elsevier, vol. 145(C).
    8. Gao, Xuwen & Shi, Xinjie & Fang, Shile, 2021. "Property rights and misallocation: Evidence from land certification in China," World Development, Elsevier, vol. 147(C).
    9. Marijn A. Bolhuis & Swapnika R. Rachapalli & Diego Restuccia, 2021. "Misallocation in Indian Agriculture," NBER Working Papers 29363, National Bureau of Economic Research, Inc.
    10. Aragón, Fernando M. & Restuccia, Diego & Rud, Juan Pablo, 2022. "Are small farms really more productive than large farms?," Food Policy, Elsevier, vol. 106(C).
    11. Gottlieb, Charles & Grobovšek, Jan, 2019. "Communal land and agricultural productivity," Journal of Development Economics, Elsevier, vol. 138(C), pages 135-152.
    12. Diego Restuccia, 2019. "Misallocation and aggregate productivity across time and space," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(1), pages 5-32, February.
    13. 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.
    14. Tasso Adamopoulos & Loren Brandt & Jessica Leight & Diego Restuccia, 2022. "Misallocation, Selection, and Productivity: A Quantitative Analysis With Panel Data From China," Econometrica, Econometric Society, vol. 90(3), pages 1261-1282, May.
    15. 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.
    16. A.V. Chari & Elaine M. Liu & Shing-Yi Wang & Yongxiang Wang, 2017. "Property Rights, Land Misallocation and Agricultural Efficiency in China," NBER Working Papers 24099, National Bureau of Economic Research, Inc.
    17. Britos, Braulio & Hernandez, Manuel A. & Robles, Miguel & Trupkin, Danilo R., 2022. "Land market distortions and aggregate agricultural productivity: Evidence from Guatemala," Journal of Development Economics, Elsevier, vol. 155(C).
    18. Fernando M. Aragón & Diego Restuccia & Juan Pablo Rud, 2022. "Assessing Misallocation in Agriculture: Plots versus Farms," Working Papers 130, Red Nacional de Investigadores en Economía (RedNIE).
    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. David Lagakos & Mushfiq Mobarak & Michael Waugh, 2018. "The Welfare Effects of Encouraging Rural-Urban Migration," Working Papers 2018-002, Human Capital and Economic Opportunity Working Group.

    More about this item

    Keywords

    misallocation; land; productivity; agriculture; Malawi; micro data.;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-575. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RePEc Maintainer (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.