Resource Misallocation in Agriculture

42 b oostin G Pro D u C tivity in s ub- sA h A r A n Afri CA

face higher distortions—especially output distortions. These higher distortions decelerate the growth of firms over their life cycles and discourage the adoption of new technologies.

This report has so far corroborated some of the stylized facts found in the literature: • There are large and persistent differences in real output per worker across countries (Hsieh and Klenow 2010; Jones 2016;

Restuccia 2011). • Poorer countries tend to allocate most of their labor to agriculture (Duarte and

Restuccia 2010, 2018; Herrendorf, Rogerson, and Valentinyi 2014). • The productivity of agriculture (relative to nonagriculture sectors) in poorer countries tends to be lower than in richer countries (Adamopoulos and Restuccia 2014; Gollin,

Lagakos, and Waugh 2014; Restuccia, Yang, and Zhu 2008).

These three stylized facts stress the important role played by agriculture in understanding the large disparities in real output per worker across countries.4

Differences in Agricultural Productivity: About Efficiency, not Geography

Are the differences in agricultural productivity between Sub-Saharan Africa and the aspirational and global efficiency benchmarks explained by land quality and geography? Or are these differences in productivity (say, differences in yields) attributable to inefficient use of agricultural inputs? Agricultural output and productivity can depend on the region’s geographical features—exogenous factors such as rainfall, temperature, and soil quality. 5 In many Sub-Saharan African countries, rural farmers who operate at subsistence levels and lack the appropriate infrastructure make up a larger share of the population than in other world regions. Under these conditions, farmers may produce crops that may not be suitable to the geographical features of the land they operate (Adamopoulos and Restuccia 2014; Gollin and Rogerson 2014).

However, low agricultural productivity in low-income countries—and, notably, in Sub-Saharan Africa—is primarily attributable to inefficiencies in the use of resources rather than poor agronomic conditions (such as low-quality land and unfavorable weather). Worldwide evidence shows that approximately 80 percent of agricultural productivity differences between poor and rich countries can be attributed to production inefficiencies. In other words, agricultural productivity in low-income countries is not low because they have lower potential yields. It is low because the actual yields lie far from their potential ones (Adamopoulos and Restuccia 2018).

Counterfactual Exercise, with Crop Selection Constant

What would be the gains in agricultural output in Sub-Saharan African countries if actual yields were raised to their potential ones? A spatial productivity growth accounting in agriculture was conducted for five large countries in the region: the Democratic Republic of Congo, Ethiopia, Kenya, Nigeria, and Tanzania.6 The benefits of closing the actual-potential yield gap is conducted under three scenarios of input use and water supply but holding constant the farmers’ crop choices (table 3.1). The different scenarios considered are (a) low input use under rainfed cultivation, (b) high input use under rainfed cultivation, and (c) high input use under irrigated cultivation (Sinha and Xi 2018).

Under the least productive scenario (low input use under rainfed cultivation), actual yields are higher than potential ones for the Democratic Republic of Congo and Nigeria. On aggregate, this implies that both countries have moved beyond the least productive scenario. In contrast, Ethiopia, Kenya, and Tanzania still can reap productivity gains from closing the actual-potential gap, even using the least sophisticated