Explaining Cross-Country Productivity Differences in Retail Trade
49 Pages Posted: 10 Feb 2013
Date Written: January 2013
Abstract
Many macro-economists argue that productivity is low in developing countries because of frictions that impede the adoption of modern technologies. I argue that in the retail trade sector, which employs just under twenty percent of the workforce on average, developing countries rationally choose technologies with low measured labor productivity. My theory is that the adoption of modern retail technologies is optimal only when household ownership of complementary durable goods, such as cars, is widespread. Because income is low in the developing world, households own few such durables; hence, retail trade is dominated by traditional technologies with low measured productivity. I show that an implication of this theory is that policies that lead to large increases in measured retail productivity do not necessarily lead to large increases in welfare.
Keywords: macroeconomics, productivity, technology adoption, retail trade, informality, home production
JEL Classification: O11, O40, E26, L81
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Misallocation and Manufacturing TFP in China and India
By Chang-tai Hsieh and Peter J. Klenow
-
Misallocation and Manufacturing TFP in China and India
By Chang-tai Hsieh and Peter J. Klenow
-
Growth Theory Through the Lens of Development Economics
By Abhijit V. Banerjee and Esther Duflo
-
Policy Distortions and Aggregate Productivity with Heterogeneous Plants
By Diego Restuccia and Richard Rogerson
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Robin Burgess, ...
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Robin Burgess, ...
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Stephen J. Redding, ...
-
The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
By Philippe Aghion, Robin Burgess, ...
-
Macroeconomic Implications of Size-Dependent Policies
By Nezih Guner, Gustavo Ventura, ...
-
By Zheng Michael Song, Kjetil Storesletten, ...