Productivity And Efficiency Of Small And Large Farms In Moldova

The paper presents a comparative analysis of the productivity of small and large farms in Moldova based primarily on cross-section data from three farm surveys conducted by the World Bank and USAID in 2000 and 2003. The survey data are supplemented where feasible with time series from official national-level statistics. We calculate partial land and labor productivity, total factor productivity, and technical efficiency scores (using Stochastic Frontier and Data Envelopment Analysis algorithms) for the two categories of small individual farms and large corporate farms. Our results demonstrate with considerable confidence that small individual farms in Moldova are more productive and more efficient than large corporate farms. This finding is not restricted to Moldova, as a similar result has been obtained by other authors in Russia (2005) and in the U.S. (2002), where a recent study has found that an increase of farm size reduces, rather than increases, agricultural productivity. Policies encouraging a shift from large corporate farms to smaller individual farms, rather than the reverse, can be expected to produce beneficial results for Moldovan agriculture and the economy in general. The government of Moldova should abandon its inherited preference for large-scale corporate farms and concentrate on policies to improve the operating conditions for small individual farms. At the very least, the government should ensure a level playing field for farms of all sizes and organizational forms, and desist from biasing its policies in favor of large farms.