Econometrica: May 2022, Volume 90, Issue 3

Misallocation, Selection, and Productivity: A Quantitative Analysis With Panel Data From China

https://doi.org/10.3982/ECTA16598
p. 1261-1282

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 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.



Full Content

Supplemental Material

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

This zip file contains the replication files for the manuscript.

Read More View ZIP


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

This online appendix contains material not found within the manuscript.

Read More View PDF



Back