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Skill Investment, Farm Size Distribution and Agricultural Productivity

Cai, Wenbiao (2011): Skill Investment, Farm Size Distribution and Agricultural Productivity.

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Abstract

Low labor productivity and small scale are key features of agriculture in poor nations. This paper assesses quantitatively the role of self selection and skill investment of farmers in accounting for these observations. I construct a two-sector overlapping generation model featuring individual heterogeneity in skill. Individuals self-select into farmers and workers as in Lucas (1978). As a key ingredient, I allow skill growth in response to optimal investment. The model is calibrated to reproduce the farm size distribution and other macroeconomic statistics in the US. Quantitative results show that low aggregate TFP and suboptimal skill investment are the main drivers of unproductive, small-scale agriculture in poor countries.

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