Highly Preliminary Draft; Under Revision Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis†

A decomposition of aggregate labor productivity based on internationally comparable data from the Food and Agriculture Organization and the Penn World Table reveals that low productivity and a high share of labor in agriculture are mainly responsible for the cur-rent position of poor countries in the world income distribution. Using a two-sector general equilibrium model, we show that differences in economy-wide productivity and barriers to the use of modern intermediate inputs in agriculture generate sizeable differences in labor productivity and labor allocation in agriculture between rich and poor countries. These differences in sectoral productivity and labor allocation in our model imply differences in aggregate productivity between rich and poor countries that are more than twice the dif-ferences generated by a one-sector growth model with the same exogenous differences in economy-wide productivity