Skill Investment, Farm Size Distribution and Agricultural Productivity

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

Abstract

This paper addresses the question why agricultural productivity is so low in poor countries. World Census of Agriculture reveals that agricultural production is of much smaller scale in developing countries. I construct a two-sector OLG model where agricultural production is carried out by heterogeneous farmers. At the farm level, optimal scale and productivity is tied to the farmer's idiosyncratic skill, which can grow over time as a result of optimal investment. At the aggregate, self-selection determines the average skill of farmers and hence the measured agricultural productivity. The calibrated model can explain almost all of the differences in agricultural productivity between the 80th and 20th percentile countries in the sample. Endogenously generated farm size distributions are close to the actual ones as well.

• Item Type: MPRA Paper
• Language: English
• Keywords: Income differences, agricultural productivity, skill investment, farm size distribution
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology

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