Land and Growth
Eliaz Ghani
Firms need capital, labor and land to produce output. More efficient firms can produce more output if they have better access to factors of production. While there may not be such a thing as a perfectly efficient factor allocation, there are huge gains to be made by reducing factor misallocation. However, our knowledge of which factor market is more distorted is still at an early stage. Might it be the case that land markets are much more distorted than capital and labor markets? If yes, there is huge need to scale up investments in advisory services focused on land and growth. Firms in India differ enormously in performance compared to the US. The productivity of a US firm in the top decile is usually twice as high as that of a firm in the bottom decile in a typical manufacturing industry. This increase is five times more so in India. This suggests considerable factor market misallocation within India. Policymakers, captains of industry and academics have long argued that Indian manufacturing productivity could be increased by more than 50% if the misallocation of factors of production in India was brought down to US levels.
Event: Land Governance in an Interconnected World_Annual World Bank Conference on Land and Poverty_2018
Only personal, non-commercial use of this document is allowed.