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The relationship between farm size and efficiency in South African agriculture

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  • van Zyl, Johan
  • Binswanger, Hans
  • Thirtle, Colin

Abstract

Drawing on international evidence, the authors discuss the sources of economies of scale. Using representative farm-level survey data for South Africa's six major grain producing areas and one irrigation area for the period 1975-90, they: describe the the structure of South African agriculture, detailing the distribution of farm sizes and results from previous studies of farm-size efficiency. They also analyze the evidence on scale efficiency in the former homelands and analyze the relationship between farm size and efficiency in commercial farming and discuss how policy affects that relationship. Clearly policy has a crucial impact on the relationship between farm size and efficiency. The authors find that: a) farms in the former homelands seem to be scale-inefficient, which is unsurprising, given the historical lack of access to support services and infrastructure, policies that discriminate against farmers in the homelands, and the extremely fragmented and limited land-use rights of farmers there; b) there is an inverse relationship between farm size and efficiency in the commercial farming areas for the range of farms analyzed, regardless what method is used. This inverse relationship seems to become stronger and accentuated as policy distortions - which tend to favor large farms over small ones - are removed; and c) large farms tend to use more capital intensive methods of production, while smaller farms are more labor-intensive. And managerial ability seems to be better on larger farms. There is an inverse relationship between farm size and efficiency in South African agriculture despite South Africa's history of policies favoring relatively large mechanized farms. Clearly, efficiency gains could be significant if commercial farms became smaller. To encourage that trend, policies and distortions that favor large farms over small should be removed.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1548.

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Date of creation: 30 Nov 1995
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Handle: RePEc:wbk:wbrwps:1548

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Keywords: Banks&Banking Reform; Environmental Economics&Policies; Agricultural Knowledge&Information Systems; Crops&Crop Management Systems; Agriculture&Farming Systems; Environmental Economics&Policies; Crops&Crop Management Systems; Agricultural Knowledge&Information Systems; Banks&Banking Reform; Economic Theory&Research;

References

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  1. Johnson, Nancy L. & Ruttan, Vernon W., 1994. "Why are farms so small?," World Development, Elsevier, Elsevier, vol. 22(5), pages 691-706, May.
  2. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, Elsevier, vol. 13(1), pages 5-25, May.
  3. T. I. Fenyes & J. Vanzyl & N. Vink, 1988. "Structural Imbalances in South African Agriculture," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 56(2-3), pages 112-122, 06.
  4. Kinsey, Bill H. & Binswanger, Hans P., 1993. "Characteristics and performance of settlement programs : a review," Policy Research Working Paper Series 1207, The World Bank.
  5. Feder, Gershon, 1985. "The relation between farm size and farm productivity : The role of family labor, supervision and credit constraints," Journal of Development Economics, Elsevier, Elsevier, vol. 18(2-3), pages 297-313, August.
  6. Chavas, Jean-Paul & Aliber, Michael, 1993. "An Analysis Of Economic Efficiency In Agriculture: A Nonparametric Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 18(01), July.
  7. W. L. Nieuwoudt & N. Vink, 1989. "The Effects of Increased Earnings from Traditional Agriculture in Southern Africa," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 57(3), pages 168-177, 09.
  8. Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, Elsevier, vol. 46(1-2), pages 39-56.
  9. J. van Zyl & C. J. van Rooyen & J. F. Kirsten & H. D. van Schalkwyk, 1994. "Land reform in south africa: Options to consider for the future," Journal of International Development, John Wiley & Sons, Ltd., vol. 6(2), pages 219-239, 03.
  10. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-98, October.
  11. Zyl, J. Van & Vink, N. & Fenyes, T. I., 1987. "Labour-Related Structural Trends in South African Maize Production," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 1(3), October.
  12. Binswanger, Hans P. & Deininger, Klaus & Feder, Gershon, 1993. "Power, distortions, revolt, and reform in agricultural land relations," Policy Research Working Paper Series 1164, The World Bank.
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Citations

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Cited by:
  1. Paul Mosley, 2002. "The African green revolution as a pro-poor policy instrument," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(6), pages 695-724.
  2. Rogier van den Brink & Glen Thomas & Hans Binswanger & John Bruce & Frank Byamugisha, 2005. "Consensus, Confusion, and Controversy : Selected Land Reform Issues in Sub-Saharan Africa," World Bank Publications, The World Bank, number 7387, August.
  3. Byiringiro, Fidele & Reardon, Thomas, 1996. "Farm productivity in Rwanda: effects of farm size, erosion, and soil conservation investments," Agricultural Economics, Blackwell, Blackwell, vol. 15(2), pages 127-136, November.
  4. Massuanganhe, Israel Jacob, 2008. "Policies, Natural Resource Governance and Local Development," Ph.D Degree Theses, University of the Free State, Department of Agricultural Economics 53061, University of the Free State, Department of Agricultural Economics.
  5. Bossio, Deborah & Geheb, Kim & Critchley, William, 2010. "Managing water by managing land: Addressing land degradation to improve water productivity and rural livelihoods," Agricultural Water Management, Elsevier, Elsevier, vol. 97(4), pages 536-542, April.

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