Institutions and Global Crop Yields
We estimate annual discontinuities in remotely-sensed crop yields at all international land borders and link them to changes in the economic freedom index by the Fraser Institute, a country-level measure of institutional quality. Each point of the ten-point index increases the discontinuity by 2.2% over the next five years, highlighting that institutional reforms have the potential to close some of the observed crop yield gap. Three subcategories are consistently significant: credit market regulation, inflation, and the top marginal tax rate. We present suggestive evidence that higher average yields are achieved through increased use of irrigation and mechanization. Yield variability remains unchanged, and reforms lead to cropland expansion through deforestation.
Authors are listed in reverse alphabetical order. We would like to thank seminar participants at ETH Zürich, Harvard University, OARES, University of Bern, University of Mannheim, and University of Zürich for comments on an earlier draft of the paper. Dylan Hogan provided excellent research assistance in extracting the date when maximum EVI occurred. Wuepper acknowledges support for this work by the European Research Council (ERC), Grant No. 101075824, and the German Research Foundation (DFG), under Germany’s Excellence Strategy EXC 2070, Grant No. 390732324. Schlenker acknowledges support for this work by USDA National Institute of Food and Agriculture, Grant No. 2022-67023-36400. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.