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The Size Distribution of Farms and International Productivity Differences

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  • Tasso Adamopoulos
  • Diego Restuccia

Abstract

There are striking differences in the size distribution of farms between rich and poor countries. We study the determinants of farm-size across countries and their impact on agricultural and aggregate productivity by developing a quantitative model of agriculture and non-agriculture that features a non-degenerate size distribution of farms. We find that differences in measured aggregate factors such as capital, land, and economy-wide productivity account for 1/4 of the observed differences in farm size and productivity. Farm-level policies that misallocate resources from large and productive farms to small and less productive farms are prevalent in poor countries and have the potential to account for the remaining differences. We assess the quantitative importance of misallocation in two ways. First, we construct a summary measure of farm-size distortions across countries by exploiting within-country variation in crop-specific price distortions and their correlation with crop farm size. This measure and aggregate factors jointly account for more than 1/2 of the cross-country differences in size and productivity. Second, we quantify the effects of specific policies in developing countries: a land reform that imposes a ceiling on farm size and a progressive land tax. We find that each individual policy generates a reduction of 3 to 7 percent in 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-494.

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Length: Unknown pages
Date of creation: 12 Aug 2013
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Handle: RePEc:tor:tecipa:tecipa-494

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Keywords: Aggregate productivity; agriculture; farm-size distortions; misallocation.;

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Citations

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Cited by:
  1. 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.
  2. 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.
  3. Trevor Tombe, 2012. "The Missing Food Problem," Working Papers tt0060, Wilfrid Laurier University, Department of Economics, revised 2012.
  4. Loren Brandt & Trevor Tombe & Xiaodong Zhu, 2012. "Factor Market Distortions across Time, Space and Sectors in China," Working Papers 262012, Hong Kong Institute for Monetary Research.
  5. 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.
  6. 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.
  7. Wei Wang & Junmin Liao, 2013. "Financial Frictions and Agricultural Productivity Differences," 2013 Meeting Papers 1314, Society for Economic Dynamics.
  8. Diego Restuccia & Richard Rogerson, 2012. "Misallocation and Productivity," Working Papers tecipa-468, University of Toronto, Department of Economics.
  9. Cai, Wenbiao, 2010. "Skill Investment, Farm Size Distribution and Agricultural Productivity," MPRA Paper 26439, University Library of Munich, Germany.
  10. Chaoran Chen, 2014. "Untitled Land, Occupational Choice, and Agricultural Productivity," Working Papers tecipa-513, University of Toronto, Department of Economics.

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