Market frictions or market failures are seen as one of the most common reasons, why economies in developing countries suffer from a lack of growth. Some stylized facts indicate a huge disparity in the productivity especially in the primary argricultural sector. The primary sector occupies a key place in the economy of developing countries. According to the UNDP in 1996 agriculture employed 60% of the labour force while contributing 20% of GDP of less developed countries, in comparison to 2% of the labour force contributing 2 % of GDP of developed countries. This indicates that there is a huge productivity gap across countries. Continue reading Inverse land-size productivity relationship: Endowments should not matter →