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Productivity and farm size in Australian agriculture: reinvestigating the returns to scale


  • Sheng, Yu
  • Zhao, Shiji
  • Nossal, Katarina


Higher productivity among large farms is often assumed to be a result of increasing returns to scale. However, using farm-level data for the Australian broadacre industry, it was found that constant or mildly decreasing returns to scale is more typical. On examining the monotonic change in marginal input returns as farm operating size increases, it was found that large farms achieve higher productivity through changes in production technology rather than through changes in scale. The results highlight the disparity between ‘returns to scale’ and ‘returns to size’ in Australian agriculture. They also suggest that improving productivity in smaller farms would depend more on their ability to access advanced technologies than their ability to simply expand. The implications for ongoing structural adjustment in Australian agriculture are discussed.

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  • Sheng, Yu & Zhao, Shiji & Nossal, Katarina, 2011. "Productivity and farm size in Australian agriculture: reinvestigating the returns to scale," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100711, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare11:100711

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    References listed on IDEAS

    1. Boussemart, Jean-Philippe & Briec, Walter & Peypoch, Nicolas & Tavéra, Christophe, 2009. "[alpha]-Returns to scale and multi-output production technologies," European Journal of Operational Research, Elsevier, vol. 197(1), pages 332-339, August.
    2. Hughes, Neal & Lawson, Kenton & Davidson, Alistair & Jackson, Tom & Sheng, Yu, 2011. "Productivity pathways: climate-adjusted production frontiers for the Australian broadacre cropping industry," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100563, Australian Agricultural and Resource Economics Society.
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    Cited by:

    1. Lawes, R.A. & Kingwell, R.S., 2012. "A longitudinal examination of business performance indicators for drought-affected farms," Agricultural Systems, Elsevier, vol. 106(1), pages 94-101.
    2. Takeshima, Hiroyuki, 2015. "Drivers of growth in agricultural returns to scale: The hiring in of tractor services in the Terai of Nepal:," IFPRI discussion papers 1476, International Food Policy Research Institute (IFPRI).
    3. Ghahramani, Afshin & Moore, Andrew D., 2016. "Impact of climate changes on existing crop-livestock farming systems," Agricultural Systems, Elsevier, vol. 146(C), pages 142-155.
    4. Bjerke, Lina, 2016. "Knowledge in agriculture: a micro data assessment of the role of internal and external knowledge in farm productivity in Sweden," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 118(2), August.
    5. Sabasi, Darlington & Kompaniyets, Lyudmyla, 2015. "Impact of credit constraints on profitability and productivity in U.S. agriculture," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205689, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    6. McFarlane, Jim A. & Blackwell, Boyd D. & Mounter, Stuart W. & Grant, Bligh J., 2016. "From agriculture to mining: The changing economic base of a rural economy and implications for development," Economic Analysis and Policy, Elsevier, vol. 49(C), pages 56-65.
    7. Yu Sheng & Eldon Ball & Katerina Nossal, 2015. "Comparing Agricultural Total Factor Productivity between Australia, Canada, and the United States, 1961-2006," International Productivity Monitor, Centre for the Study of Living Standards, vol. 29, pages 38-59, Fall.
    8. Hutchings, T.R., 2013. "Financial risk on dryland farms in south-eastern Australia," Dissertations-Doctoral 204434, AgEcon Search.

    More about this item


    returns to scale; returns to size; production function; technology progress; structural adjustment; Australian agriculture; Agricultural and Food Policy;

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