According to national accounts data, value added per worker is much higher in the nonagricultural sector than in agriculture in the typical country, particularly in developing countries. Taken at face value, this “agricultural productivity gap” suggests that labor is greatly misallocated across sectors. In this article, we draw on new micro evidence to ask to what extent the gap is still present when better measures of sector labor inputs and value added are taken into consideration. We find that even after considering sector differences in hours worked and human capital per worker, as well as alternative measures of sector output constructed from household survey data, a puzzlingly large gap remains.
I develop a novel view of the trade frictions between rich and poor countries by arguing that to reconcile bilateral trade volumes and price data within a standard gravity model, the trade frictions between rich and poor countries must be systematically asymmetric, with poor countries facing higher costs to export relative to rich countries. I provide a method to model these asymmetries and demonstrate the merits of my approach relative to alternatives in the trade literature. I then argue that these trade frictions are quantitatively important to understanding the large differences in standards of living and total factor productivity across countries. (JEL F11, F13, F14, O19 )
for their hospitality and financial support through the Peter B. Kenen fellowship. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
Recent studies argue that cross-country labor productivity differences are much larger in agriculture than in the aggregate. We reexamine the agricultural productivity data underlying this conclusion using new evidence from disaggregate sources. We find that for the world's staple grains-maize, rice, and wheat-cross-country differences in the quantity of grain produced per worker are enormous according to both micro- and macrosources. Our findings validate the idea that understanding agricultural productivity is at the heart of understanding world income inequality.
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