Why are some firms more productive than others? This has been a central question in economics for nearly a century, and its answer has implications for the long term well-being of societies, and for how government policy can promote this well-being. In this project we will study the most common firm type in the world: the family-owned farm. Our research focuses on farms in Africa, which employ a large share of the world?s poor. A detailed understanding the productivity of these firms -- whether and why some firms are more productive than others ? will help provide the foundation for designing policy interventions that could improve their overall productivity, and thus lift incomes for many of the world's poorest. Working with US satellite companies, we will also generate new estimates of agricultural productivity based on satellite imagery, and make these data available to both researchers and policymakers. Results from this research has policy implications for increasing the productivity of small businesses and thus reduce poverty throughout the world, including in the U.S.
The goal of our proposed work is to characterize the size and sources of productivity dispersion across family owned farms, the most common firm type in the world and the employer of a majority of the world's poor. Productivity dispersion has been well studied among firms in the developed world, but surprisingly little is known about the temporal and spatial patterns of productivity dispersion in poor countries. Understanding the size and source of productivity gaps among agricultural firms -- previously difficult to study due to lack of data -- would fill a large gap in the existing productivity literature.
We propose to make progress on this question by combining two newly-available sources of data: a growing set of high-quality household panel surveys currently underway by the World Bank in multiple African countries, and brand-new high-resolution satellite-based estimates of land productivity in Eastern Africa. These two data sources, in combination, will allow us to evaluate for agricultural firms the stylized facts that have been established for manufacturing and retail firms: whether productivity dispersion across firms is large and persistent, whether firm entry and exit are correlated with productivity, and whether selective exit and entry are an important source of aggregate productivity growth within the agricultural sector. Analysis will be conducted across nine African countries.
