Beyond Productivity: Technology Adoption and Factor Allocation in Agriculture

ABSTRACT This paper examines the causal impact of agronomic technology adoption, induced by technical assistance programmes, on factor misallocation and aggregate agricultural productivity. While the literature has established the central role of land and capital market imperfections as sources of misallocation in agriculture, the potential of technological adoption to correct these inefficiencies has received limited attention. This paper directly addresses this gap by combining a calibrated equilibrium model with causal inference methods, using Chile as a case study. The results show that, among farmers whose adoption is induced by access to technical assistance programmes, factor misallocation is reduced by approximately 22 percentage points. This effect is robust across alternative efficiency measures, functional specifications and parametric assumptions, and remains stable after purging idiosyncratic productivity from agroclimatic conditions such as rainfall and soil quality. Technological adoption significantly increases participation in land rental markets and access to bank credit, thereby facilitating the reallocation of resources towards more productive farmers. In addition, the analysis identifies local spillover effects: farmers in municipalities with higher adoption rates exhibit lower misallocation. Counterfactual exercises further indicate that these effects are amplified when frictions in land markets are reduced.