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The Size Distribution of Farms and International Productivity Differences

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  • Tasso Adamopoulos

    (York University)

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    Abstract

    Using internationally comparable data from the World Agricultural Census, we document a factor of 36 difference in average farm size between rich and poor countries. Small farms of less than 2 hectares represent more than 70% of farms in poor countries but only 15% in rich countries, whereas large farms of more than 20 hectares represent none of the farms in poor countries and almost 40% in rich countries. Two questions emerge. First, what explains the striking differences in farm size across countries? Second, are farm-size differences important in understanding agricultural and aggregate productivity gaps across countries? We develop a two sector model with agriculture and non-agriculture that features a non-degenerate size distribution of farms. The theory embeds a Lucas (1978) span-of-control model of farm size into a standard sectoral model with non-homothetic preferences. In the model calibrated to the United States, a reduction in economy-wide productivity from 1 to 1/4 produces an increase in the share of employment in agriculture from 2.5% to 53%, a 21-fold reduction in average farm size, and a 25-fold reduction in agricultural labor productivity. These results are broadly consistent with data on the sectoral allocation of labor and the size distribution of farms across countries.

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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1145.

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    Date of creation: 2010
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    Handle: RePEc:red:sed010:1145

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    1. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    2. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," Discussion Papers 07-006, Stanford Institute for Economic Policy Research.
    3. Francisco J. Buera & Joseph Kaboski, 2008. "Scale and the origins of structural change," Working Paper Series WP-08-06, Federal Reserve Bank of Chicago.
    4. Diego Restuccia & Dennis Tao Yang & Xiaodong Zhu, 2003. "Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis," Working Papers diegor-03-01, University of Toronto, Department of Economics.
    5. Tasso Adamopoulos, 2006. "Transportation Costs, Agricultural Productivity and Cross-Country Income Differences," 2006 Meeting Papers 663, Society for Economic Dynamics.
    6. Cornia, Giovanni Andrea, 1985. "Farm size, land yields and the agricultural production function: An analysis for fifteen developing countries," World Development, Elsevier, vol. 13(4), pages 513-534, April.
    7. Michael Waugh & David Lagakos, 2009. "Specialization, Economic Development and Aggregate Productivity Differences," 2009 Meeting Papers 1248, Society for Economic Dynamics.
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