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Transportation Costs, Agricultural Productivity and Cross-Country Income Differences

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  • Tasso Adamopoulos

    (Department of Economics York University)

Abstract

There are large differences in transportation infrastructure across nations. Constructing a measure of transportation infrastructure density for a large set of countries, I show that the disparity in this measure between the 5% income rich and the 5% income poor countries is a factor of 28. Are these differences a source of productivity differences across nations? Using a three-sector, two-region, general equilibrium model, I show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non-agriculture. Taking as given the observed differences in transportation infrastructure densities, I quantify the role of transportation for cross-country income differences. The calibrated model produces an income disparity of 10.9 between the 5% rich and 5% poor countries. This corresponds to an improvement of 35% relative to the disparity predicted by a two sector model of agriculture and non-agriculture. Furthermore, the effects of advancements in transportation are non-linear: the elasticity of aggregate labor productivity with respect to the stock of transportation infrastructure in the poorest nations is 15 times higher than in the richest ones

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  • Tasso Adamopoulos, 2006. "Transportation Costs, Agricultural Productivity and Cross-Country Income Differences," 2006 Meeting Papers 663, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:663
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    More about this item

    Keywords

    Productivity Differences; Sectoral Productivity; Transportation Costs;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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