The Determinants of Agricultural Production: A Cross-Country Analysis

Abstract

Bank; and Rita Butzer is a consultant at the World Bank. The authors would like to thank Al Crego for valuable research assistance. This research was conducted at the World Bank as part of a larger research effort on the determinants of agricultural growth (RPO 679-03). Summary findings This study is triggered by the desire to shed light on the role of capital in agricultural production, a neglected topic due to lack of appropriate data. The construction of the data on capital allowed us to advance the cross-country study of production functions in what turns out to be an important direction. The analysis is based on the premise that the production technology is heterogeneous and the implemented technology is endogenous and determined jointly with the level of the unconstrained inputs. Therefore, a change in the state variables affects both the technology and the inputs, and consequently the production function is not identified. To overcome this problem, we decompose the changes in productivity to three orthogonal components caused by the fundamentally different processes underlying panel data and thereby gain meaningful economic insight.

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