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Subsistence Farming and Factor Misallocation: Evidence from Ugandan Agriculture

Author

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  • Bruno Morando
Abstract
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.

Suggested Citation

  • Bruno Morando, 2023. "Subsistence Farming and Factor Misallocation: Evidence from Ugandan Agriculture," The World Bank Economic Review, World Bank, vol. 37(4), pages 570-598.
    • Handle: RePEc:oup:wbecrv:v:37:y:2023:i:4:p:570-598.
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    File URL: http://hdl.handle.net/10.1093/wber/lhad017
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    More about this item

    Keywords

    misallocation; productivity; agriculture; Uganda;
    All these keywords.

    JEL classification:

    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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