Subsistence Farming and Factor Misallocation
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Published by Oxford University Press on behalf of the World Bank
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This paper presents a model where
misallocation in the agricultural factors of production is
caused by transportation costs to and from local markets,
which result in an inefficiently large share of inputs
operated by less productive subsistence farmers. The model
derives some testable predictions which are verified in the
empirical analysis, based on a representative census of
Ugandan farms. Specifically, subsistence farmers operate
inefficiently high shares of land and capital, and the
efficiency losses are more severe in areas where subsistence
farming is more widespread, due to lower connectivity with
local markets. Conversely, there is no relationship between
the level of misallocation and credit access and/or
land-market activity. These findings suggest that
transportation costs play a key role in determining the
efficiency of agricultural input distribution and that
land-market liberalization is a necessary but not sufficient
condition to tackle misallocation.
Palabras clave
MISALLOCATION, PRODUCTIVITY, AGRICULTURE, UGANDA