Misallocation, Selection, and Productivity: A Quantitative Analysis With Panel Data From China. Issue 3 (27th May 2022)

• Record Type: Journal Article
• Authors: Adamopoulos, Tasso; Brandt, Loren; Leight, Jessica; Restuccia, Diego
• Is Part Of: Econometrica. Volume 90:Issue 3(2022)
• Page Start: 1261
• Page End: 1282
• Publication Date: 2022-05-27
• Subjects: Agriculture -- misallocation -- selection -- productivity -- China; Econometrics -- Periodicals; Economics, Mathematical -- Periodicals; Economics -- Periodicals; Économétrie -- Périodiques; Mathématiques économiques -- Périodiques; Économie politique -- Périodiques; 330.05
• DOI: 10.3982/ECTA16598
• Languages: English
• ISSNs: 0012-9682

Abstract

Abstract : 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 within‐village 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 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). Selection substantially amplifies the productivity effect of distortionary policies by affecting occupational choices that worsen average ability in agriculture.