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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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Citations

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Cited by:
  1. Trevor Tombe, 2014. "The Missing Food Problem," Working Papers 2014-35, Department of Economics, University of Calgary, revised 05 Feb 2014.
  2. Loren Brandt & Trevor Tombe & Xiadong Zhu, 2013. "Factor Market Distortions Across Time, Space, and Sectors in China," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 39-58, January.
  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. Deininger, Klaus & Nizalov, Denys & Singh, Sudhir K, 2013. "Are mega-farms the future of global agriculture ? exploring the farm size-productivity relationship," Policy Research Working Paper Series 6544, The World Bank.
  5. 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.
  6. Klaus Deininger & Denys Nizalov & Sudhir K Singh, 2013. "Are mega-farms the future of global agriculture? Exploring the farm size-productivity relationship for large commercial farms in Ukraine," Discussion Papers 49, Kyiv School of Economics.
  7. Cai, Wenbiao, 2010. "Skill Investment, Farm Size Distribution and Agricultural Productivity," MPRA Paper 26439, University Library of Munich, Germany.

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