Douglas Gollin speaks at World Bank Agriculture Policies Community of Practice
Professor Douglas Gollin presented his research on ‘Heterogeneity, Measurement Error, and Misallocation: Evidence from African Agriculture’ at an event hosted by the World Bank’s Agriculture Policies Community of Practice earlier this month
The presentation drew on work that Professor Gollin is carrying out with Professor Christopher Udry of Northwestern University.
The paper looks at the broad dispersion of productivity among farms in three countries in Africa. In detailed micro data, some farmers seem to achieve relatively high levels of TFP, but many farms appear to operate at very low levels of measured TFP. One possible explanation for this is that some farmers have low levels of skill but continue nevertheless to farm because of market failures or distortions that make it difficult for them to be bought out by more skilful farmers. This kind of misallocation could be an important source of differences in agricultural productivity across countries – and thus an important explanation for cross-country differences in per capita income.
The work that Professor Gollin presented – which is still at an early stage – points out that misallocation can be difficult to distinguish empirically from a range of measurement errors, classical and non-classical. It is also difficult to distinguish farmer quality from differences in the quality of land and other inputs. Moreover, it can be difficult to measure agricultural productivity well in a highly volatile production environment.
Their paper presents a theoretical framework and empirical results that seek to understand the distinctions between heterogeneity, measurement error, and misallocation in African agriculture, using data from Ghana, Tanzania, and Uganda.
Preliminary results suggest that both measurement error and unobserved heterogeneity in land quality can account for a large amount of the measured differences in farm productivity, and these results also imply that misallocation may have a relatively modest impact on output.
The event, which took place on 12 April, was chaired by Juergen Voegele, Senior Director, Agriculture Global Practice.
A community of practice at the World Bank is an informal group of practitioners that shares knowledge on common development problems while pursuing joint solutions.