Do small and equally distributed farm sizes imply large resource misallocation? Evidence from wheat-maize double-cropping in the North China Plain

The egalitarian allocation of agricultural land and small operational farm sizes in rural China raise questions about the implications for overall productivity given that there exists potentially large heterogeneity in farm-level productivities. This paper examines to what extent land and capital are misallocated in a region in the North China Plain that is characterized by small and relatively equally distributed farm sizes. Using a survey data set collected from wheat-maize double-cropping farms, we find that the dispersion in farm-level total factor productivities is small, and the quantified gains in aggregate agricultural output (productivity) by reallocating factors from less productive to more productive farms are moderate compared to the findings in the previous literature. The estimated output (productivity) gains range from 7% for within-village reallocation to 10% for between-village reallocation in the region. We argue that these findings are largely explained by the high-level use of hired machinery services among smallholders in the region.