Farm Size Inequality in Israel: 1971-1995

farm size inequality is a natural outcome of farm specialization and the advantages of scale economies for more successful farmers, but it could weaken the common interests among farmers and thus their political power. This is especially true for farms that are organized in cooperatives, such as the Israeli Moshav. The weakening of cooperation in the Moshav since the 1980s has contributed to increased farm diversity in both size and specialization, and this in turn further weakened the cooperatives and reduced their ability to use political power to promote common interests. The purpose of this paper is to analyze the changes in farm size inequality among family farms in the Moshav sector between 1971 and 1995 and their determinants. We take advantage of two decomposition methodologies that have been used previously to analyze income inequality: decomposition of inequality by income sources and by regression. Each of these methods is applied to two inequality indices: the Gini coefficient and the CV index. Farm size is measured by the normative value of output, and outputs of different farm products represent different income sources. We use data from the two recent censuses of agriculture in Israel, 1971 and 1981, and subsequent 1995 farm survey that was based on the census questionnaires. We find that farm size inequality has increased over the years. The decomposition by type of farm products shows that farm size inequality stems primarily from size inequality within poultry and beef farms. The decomposition by regression attributed most farm size inequality to capital stock and unobserved factors. While the importance of capital stock diminished considerably over the years, the slack was not captured by other explanatory variables but rather by unobserved factors, so that over the years it became more difficult to describe and explain farm size inequality.