Heterogeneity, Measurement Error, and Misallocation: Evidence from African Agriculture

101 Pages Posted: 3 Jan 2019

See all articles by Douglas Gollin

Douglas Gollin

Oxford Department of International Development; Williams College; Yale University

Christopher Udry

Northwestern University

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 2019

Abstract

Standard measures of productivity display enormous dispersion across farms in Africa. Crop yields and input intensities appear to vary greatly, seemingly in conflict with a model of efficient allocation across farms. In this paper, we present a theoretical framework for distinguishing between measurement error, unobserved heterogeneity, and potential misallocation. Using rich panel data from farms in Tanzania and Uganda, we estimate our model using a highly flexible specification in which we allow for several kinds of measurement error and heterogeneity. We find that measurement error and heterogeneity together account for a large fraction – perhaps two-thirds to three-quarters -- of the dispersion in measured productivity. We suggest that the potential for efficiency gains through reallocation may be relatively modest.

Suggested Citation

Gollin, Douglas and Udry, Christopher, Heterogeneity, Measurement Error, and Misallocation: Evidence from African Agriculture (December 1, 2019). Global Poverty Research Lab Working Paper No. 18-108, Available at SSRN: https://ssrn.com/abstract=3309782 or http://dx.doi.org/10.2139/ssrn.3309782

Douglas Gollin

Oxford Department of International Development ( email )

Queen Elizabeth House
3 Mansfield Road
Oxford, OX1 3TB
United Kingdom

Williams College ( email )

Fernald House
Williamstown, MA 01267
United States

Yale University ( email )

28 Hillhouse Ave
New Haven, CT 06520-8264
United States

Christopher Udry (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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