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Technology Adoption, Capital Deepening, and International Productivity Differences
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Technology Adoption, Capital Deepening, and International Productivity Differences

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  • Chaoran Chen

    (University of Toronto)

Abstract

Cross-country differences in capital intensity are larger in the agricultural sector than in the non-agricultural sector, indicating that rich and poor countries differ in agricultural technology adoption. I build a two-sector general equilibrium model featuring technology adoption in agriculture. As the economy develops, farmers gradually adopt a modern capital-intensive technology to replace the traditional labour-intensive technology, as is observed in the U.S. historical data. Using this model, I find that the technology adoption channel is key to accounting for low agricultural capital intensity and labour productivity in poor countries. In the model, measured aggregate factors – land endowment, economy-wide productivity, and barriers to investment – can explain 1.56-fold more in rich-poor agricultural productivity differences compared to a model without technology adoption. I further show that land market frictions in agriculture impede technology adoption and magnify productivity differences.

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  • Chaoran Chen, 2017. "Technology Adoption, Capital Deepening, and International Productivity Differences," 2017 Meeting Papers 9, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:9
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    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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