Contact: Prof. Raquel Fernandez - firstname.lastname@example.org
Paper link can be found here: Capital Obsolesecence and Agricultural Productivity by Julieta Caunedo and Elisa Keller
Abstract: This paper studies the role of capital quality in accounting for agricultural productivity differences across countries.
We construct a novel dataset of agricultural equipment prices and make three contributions. First, we document that economies with higher labor productivity growth in agriculture display lower relative prices of old-to-new equipment. Second, we link these relative price differences to the path of capital quality using a model that features endogenous quality adoption via capital vintages. Our model generates an identification restriction that links the growth rate of capital quality in an economy to the slope of the age-price profile, and the quality of the best capital vintage operated to the intercept of the profile. Third, using this identification restriction, we build a measure of the quality of the capital stock in a sample of 19 countries at different stages in the development path. We find that capital quality explains half of the agricultural productivity growth differences and a third of the differences in the level of productivity in the sample.