Transportation Costs, Agricultural Productivity, and Cross‐country Income Differences*

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.

A Passage to India: Quantifying Internal and External Barriers to Trade

“…Based on detailed micro data, Donaldson (2016), Atkin and Donaldson (2016), Allen (2014), Asturias et al (2016), and Adamopoulos (2011) quantify the size and nature of intracountry trade frictions for developing countries but do not compare them to international trade frictions. Other work has estimated the regional effects of differential market access within countries on the gains from trade.…”

The Role of Productivity, Transportation Costs, and Barriers to Intersectoral Mobility in Structural Transformation

“…Herrendorf et al (2012) study the effect of the construction of railroads in the US during 1840-1860, and find that the associated reduction in transportation costs lead to settlement of the most fertile land in the Midwest, and a reduction in the agricultural labor force. Adamopoulos (2011) shows that transportation costs can lead to low aggregate output per worker, by reducing productivity within sectors and distorting allocation of resources across locations and between sectors. He analyzes the effect of cross country transportation cost disparities and finds that improvements in transportation productivity would have an asymmetric result on the poor and developed countries, with the former gaining more.…”

Entrepreneurship and the Reallocation of African Farmers

“…Naudé and Matthee (2007) found that 12 international transport costs to and from African countries to be basically twice as high as the world average. Adamopoulos (2011) found that freight rail is 10 times more expensive in Uganda and Mali than in the United States. He shows that low transport productivity and high transport costs makes agricultural trade in Africa unprofitable and hence contribute to the misallocation of resources, as it limits specialization, and limits the use of sophisticated inputs (see also Kariuki, 2011).…”

“…He shows that low transport productivity and high transport costs makes agricultural trade in Africa unprofitable and hence contribute to the misallocation of resources, as it limits specialization, and limits the use of sophisticated inputs (see also Kariuki, 2011). Using a CGE model Adamopoulos (2011) calculates that if the advanced economies had the same transport productivity of African countries their GDP would be 10 per cent lower.…”