A long stream of literature in macroeconomic growth and international development has focused on understanding the large income differences across countries. These income differences are much larger in the agricultural sector than in the non-agricultural sectors of the economy. And since poor countries allocate a large share of their economic resources to the agricultural sector, understanding the sources of low agricultural productivity in these countries is key to understanding underlying reasons for low agricultural incomes. In each chapter of this dissertation, I investigate a possible solution to the issue of large share of economic resources in the low productivity agricultural sector in developing countries. The first chapter studies how agricultural productivity can be increased by a more efficient allocation of resources. The second chapter focuses on improving productivity through increased fertilizer usage in poor countries and the last chapter studies how agricultural incomes can be increased through an open economy and increased trade.
Chapter 1 studies agricultural resource misallocation in Ethiopia and Malawi. The misallocation of resources has been shown to be an important detriment to agricultural productivity in poor countries. Previous studies have focused on misallocation across farming households, which could arise due to frictions in credit or factor markets. I use detailed plot-level data from Ethiopia and Malawi that allows me to Sara Esfahani measure misallocation both within and across households. I find that the within-household misallocation across plots is substantially larger than between-household misallocation: approximately 70% of the overall misallocation is associated to within-household misallocation, even after controlling for many observable characteristics. Critically, I argue that market-level distortions generate within-household misallocation. In particular, the lack of land markets leads to households with spatially segregated plots, which are hard to optimize across. This accounts for half of the total share of within-household variations. A critical implication of agricultural market distortions is therefore their ability to distort within-household decision making. Therefore, not taking this effect on within-household misallocation into account, understates the gains from improving rural land markets.
Chapter 2 investigates low intermediate usage among the poor in developing countries, which contributes to vast agricultural productivity differences across countries. In this chapter, I aim to identify to what extent is this empirical finding driven by distortions, as opposed to efficient sorting based on complementary skill or inputs. I develop a statics model of agricultural decision making, and show that these two channels can be distinguished by considering farmers responses to an intermediate subsidy. I then utilize the roll out of a large-scale fertilizer subsidy program in Malawi to assess the relative importance of these two channels. Utilizing a five year panel of Malawi farmers and variation in program roll-out, I find that fertilizer utilization has increased as a result of the input subsidy program in Malawi. And although coupon recipients have increased their intermediate inputs usage, the number of coupons received does not seem to be a significant factor. When comparing the effects of the program across different wealth groups, I find some weak evidence of richer villages benefiting more than the poorer ones if they received any coupons, consistent with evidence of complementarity between fertilizer and other inputs of production that are scares to poor.
Chapter 3 examines the implications of an open economy model of structural change by studying structural change patterns across US states, counties, and metro-areas and comparing these patterns to cross-country patterns. I develop a model of structural change and introduce a trade cost parameter into the model. This model predicts that countries should specialize in producing in their comparative advantage sector. Therefore, in an open economy (unlike a closed economy), we expect to see higher shares of employment in the most productive sector. This study evaluates the predictions of an open economy model of structural change using US local data, where trade costs are significantly lower than across countries. The analysis starts across the states within the US and gets more disaggregated to the level of counties within a state and metro-areas. As data gets more disaggregated the distances between locations decline, which implies lower trade costs and therefore higher degrees of specialization. From the data, I cannot find enough evidence to support the predictions of the open- economy structural change model. Structural change patterns seem to depend on income levels more than they depend on productivity levels.
|School:||University of Notre Dame|
|School Location:||United States -- Indiana|
|Source:||DAI-A 80/06(E), Dissertation Abstracts International|
|Keywords:||Agricultural economics, Agricultural productivity, Economic development, Land markets|
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