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The Size Distribution of Farms and International Productivity Differences

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  • Tasso Adamopoulos
  • Diego Restuccia

Abstract

There is a 34-fold difference in average farm size (land per farm) between rich and poor countries and striking differences in their size distributions. Since labor productivity is much higher in large relative to small farms, we study the determinants of farm-size differences across countries and their impact on agricultural and aggregate productivity. We develop a quantitative model of agriculture and non-agriculture that features a non-degenerate size distribution of farms. We find that measured aggregate factors such as capital, land, and economy-wide productivity cannot account for more than 1/4 of the observed differences in farm size and productivity. We argue that, among the possible explanations, farm-level policies that misallocate resources from large to small farms have the most potential to account for the remaining differences. Such farm-size distortions are prevalent in poor countries. We quantify the effects of two specific policies in developing countries: (a) a land reform that imposes a ceiling on farm size and (b) a progressive land tax. We find that each individual policy generates a reduction of 3 to 7% in average size and productivity.

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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-441.

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Length: Unknown pages
Date of creation: 27 Oct 2011
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-441

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Keywords: aggregate productivity; agriculture; farm-size distortions; misallocation;

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References

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  1. Ngai, Liwa Rachel & Pissarides, Christopher, 2004. "Structural Change in a Multi-Sector Model of Growth," CEPR Discussion Papers 4763, C.E.P.R. Discussion Papers.
  2. Richard Rogerson & Diego Restuccia, 2004. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," 2004 Meeting Papers 69, Society for Economic Dynamics.
  3. David Lagakos, 2009. "Superstores or mom and pops? Technolgy adoption and productivity differences in retail trade," Staff Report 428, Federal Reserve Bank of Minneapolis.
  4. Diego Restuccia & Richard Rogerson, 2013. "Misallocation and productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 1-10, January.
  5. Guner, Nezih & Ventura, Gustavo & Yi, Xu, . "Macroeconomic Implications of Size-Dependent Policies," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/5088, Universidad Carlos III de Madrid.
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Citations

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Cited by:
  1. Xiaodong Zhu & Trevor Tombe & Loren Brandt, 2011. "Factor Market Distortions Across Time, Space and Sectors in China," 2011 Meeting Papers 1301, Society for Economic Dynamics.
  2. Diego Restuccia & Richard Rogerson, 2012. "Misallocation and Productivity," Working Papers tecipa-468, University of Toronto, Department of Economics.
  3. Trevor Tombe, 2010. "The Missing Food Problem: How Low Agricultural Imports Contribute to International Income and Productivity Differences," Working Papers tecipa-416, University of Toronto, Department of Economics.
  4. Cai, Wenbiao, 2010. "Skill Investment, Farm Size Distribution and Agricultural Productivity," MPRA Paper 26439, University Library of Munich, Germany.
  5. Loren Brandt & Trevor Tombe & Xiadong Zhu, 2012. "Online Appendix to "Factor Market Distortions Across Time, Space, and Sectors in China"," Technical Appendices 11-95, Review of Economic Dynamics.
  6. Trevor Tombe, 2012. "The Missing Food Problem," Working Papers tt0060, Wilfrid Laurier University, Department of Economics, revised 2012.

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