NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Heterogeneity, Measurement Error and Misallocation: Evidence from African Agriculture

Douglas Gollin, Christopher R. Udry

NBER Working Paper No. 25440
Issued in January 2019
NBER Program(s):The Development Economics Program

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 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 – as much as ninety percent -- of the dispersion in measured productivity. In contrast to some previous estimates, we suggest that the potential for efficiency gains through reallocation of land across farms and farmers may be relatively modest.

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Document Object Identifier (DOI): 10.3386/w25440

 
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