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Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis

  • Diego Restuccia
  • Dennis Tao Yang
  • Xiaodong Zhu

A decomposition of aggregate labor productivity based on internationally comparable data reveals that a high share of employment and low labor productivity in agriculture are mainly responsible for low aggregate productivity in poor countries. Using a two-sector general-equilibrium model, we show that differences in economy-wide productivity, barriers to modern intermediate inputs in agriculture, and barriers in the labor market generate large cross-country di?erences in the share of employment and labor productivity in agriculture. The model implies a factor difference of 10.8 in aggregate labor productivity between the richest and the poorest 5 percent of the countries in the world, leaving the unexplained factor at 3.2. Overall, this two-sector framework performs much better than a single-sector growth model in explaining observed differences in international productivity.

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Paper provided by Virginia Polytechnic Institute and State University, Department of Economics in its series Working Papers with number e07-3.

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Length: 42 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:vpi:wpaper:e07-3
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