Land Misallocation and Productivity
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Using detailed household-farm level data from Malawi, we measure real farm total factor productivity (TFP) controlling for a wide array of factor inputs, land quality, and transitory shocks. We nd that factor inputs are roughly evenly spread among farmers: operated land size and capital are essentially unrelated to farm TFP implying a strong negative eect on aggregate agricultural productivity. A reallocation of factors to their ecient use among existing farmers would increase agricultural produ ctivity by a factor of 3.6-fold. We relate factor misallocation to severely restricted land markets as the vast majority of land is without a title and a very small portion of operated land is rented in. The gains from reallocation are 2.6 times larger for farms with no marketed land than for farms that operate marketed land. The ecient reallocation of factor inputs in the agricultural sector would trigger a profound process of structural change setting the farm size and the agricultural employm ent share of Malawi to industrialized levels.