Assessing Misallocation in Agriculture: Plots versus Farms
We assess the extent and cost of misallocation in agriculture in less-developed countries comparing the analysis at the plot and farm levels. Using detailed data from Uganda, we show that the plot-level analysis leads to extremely large estimates of reallocation gains, even after adjusting for measurement error and unobserved heterogeneity. These results reflect two empirical limitations of the plot as unit of analysis: excess measurement error and near constant returns to scale production estimates. We find limited evidence of substantial measurement error at the farm level.
All errors and interpretations are our own. Restuccia gratefully acknowledges the support from the Canada Research Chairs program and the Bank of Canada Fellowship. Aragon gratefully acknowledges financial support from the Social Sciences and Humanities Research Council of Canada, grant 435-2018-0227. Rud gratefully acknowledges the support from the Economic and Social Research Council (UK Research and Innovation), Project ES/S014438/1. The views expressed herein are not necessarily those of the Bank of Canada and are the authors alone. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.