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Are small farms really more productive than large farms?

Author

Listed:
  • Fernando Aragón

    (Simon Fraser University)

  • Diego Restuccia

    (University of Toronto)

  • Juan Pablo Rud

    (Royal Holloway, University of London/IFS)

Abstract

This paper shows that the study of the farm size-productivity relationship hinges on the choice of productivity measure. Our main insight is that using yields, a partial measure of productivity commonly used in the literature, may not be informative. This occurs because, in addition to total factor productivity, yields pick up input markets distortions and deviations from constant returns to scale. We examine the empirical relevance of this insight using detailed microdata from Uganda. We find an inverse relationship between yields and farm size. We show the relationship turns positive when accounting for market distortions and returns to scale; or when using a farm- specific component of total factor productivity.

Suggested Citation

  • Fernando Aragón & Diego Restuccia & Juan Pablo Rud, 2021. "Are small farms really more productive than large farms?," Working Papers 44, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:44
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    Cited by:

    1. Nicholas Li, 2021. "In-kind transfers, marketization costs and household specialization: Evidence from Indian farmers," Working Papers tecipa-700, University of Toronto, Department of Economics.
    2. Elizabeth Ahikiriza & Joshua Wesana & Xavier Gellynck & Guido Van Huylenbroeck & Ludwig Lauwers, 2021. "Context Specificity and Time Dependency in Classifying Sub-Saharan Africa Dairy Cattle Farmers for Targeted Extension Farm Advice: The Case of Uganda," Agriculture, MDPI, vol. 11(9), pages 1-19, August.
    3. Marijn Bolhuis & Swapnika Rachapalli & Diego Restuccia, 2021. "Misallocation in Indian Agriculture," Working Papers tecipa-709, University of Toronto, Department of Economics.
    4. Thanh‐Tung Nguyen & Trung Thanh Nguyen & Ulrike Grote, 2023. "Internet use and agricultural productivity in rural Vietnam," Review of Development Economics, Wiley Blackwell, vol. 27(3), pages 1309-1326, August.
    5. Zhang, Cheng & Nie, Kunxi & Zhu, Yueji, 2024. "Participation in land rental and labor markets and agricultural economic performance of banana farmers in China," Land Use Policy, Elsevier, vol. 146(C).
    6. Hailemariam Ayalew & Jordan Chamberlin & Carol Newman & Kibrom A. Abay & Frederic Kosmowski & Tesfaye Sida, 2024. "Revisiting the size–productivity relationship with imperfect measures of production and plot size," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 595-619, March.
    7. Ahmed, Shakil & Mallick, Debdulal & Roy Chowdhury, Prabal, 2025. "Marshall Meets Lewis: Efficiency of Sharecropping in the Presence of Surplus Labor," MPRA Paper 123684, University Library of Munich, Germany.
    8. Andrew P. Barnes, 2023. "The role of family life‐cycle events on persistent and transient inefficiencies in less favoured areas," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(1), pages 295-315, February.
    9. Meilin Ma & Jessie Lin & Richard J. Sexton, 2022. "The Transition from Small to Large Farms in Developing Economies: A Welfare Analysis," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 111-133, January.
    10. Britos, Braulio & Hernandez, Manuel A. & Robles, Miguel & Trupkin, Danilo R., 2022. "Land market distortions and aggregate agricultural productivity: Evidence from Guatemala," Journal of Development Economics, Elsevier, vol. 155(C).
    11. Beatriz Manotas-Hidalgo, 2021. "Addressing Oil Spills and Agricultural Productivity. Evidence of Pollution in Nigeria," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 2109, Departamento de Economía - Universidad Pública de Navarra.
    12. Meilin Ma & Richard J. Sexton, 2021. "Modern agricultural value chains and the future of smallholder farming systems," Agricultural Economics, International Association of Agricultural Economists, vol. 52(4), pages 591-606, July.
    13. C. S. C. Sekhar & Namrata Thapa, 2023. "Rural market imperfections in India: Revisiting old debates with new evidence," Development Policy Review, Overseas Development Institute, vol. 41(5), September.
    14. Cherevko Heorhiy & Yatsiv Ihor & Cherevko Iryna & Yatsiv Svitlana, 2024. "The Prospects of Small Business Entities in the Agricultural Production System of Ukraine," Folia Oeconomica Stetinensia, Sciendo, vol. 24(2), pages 41-68.
    15. Shiladitya Dey & Piyush K. Singh, 2023. "Role of market participation on smallholder vegetable farmers' wellbeing: Evidence from matching approach in Eastern India," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 1217-1237, October.
    16. Khonje, Makaiko G. & Nyondo, Christone & Mangisoni, Julius H. & Ricker-Gilbert, Jacob & Burke, William J. & Chadza, William & Muyanga, Milu, 2022. "Does subsidizing legume seeds improve farm productivity and nutrition in Malawi?," Food Policy, Elsevier, vol. 113(C).
    17. Helfand, Steven M. & Taylor, Matthew P.H., 2021. "The inverse relationship between farm size and productivity: Refocusing the debate," Food Policy, Elsevier, vol. 99(C).
    18. Aragón, Fernando M. & Restuccia, Diego & Rud, Juan Pablo, 2024. "Assessing misallocation in agriculture: Plots versus farms," Food Policy, Elsevier, vol. 128(C).
    19. Chiarella, Cristina & Meyfroidt, Patrick & Abeygunawardane, Dilini & Conforti, Piero, 2023. "Balancing the trade-offs between land productivity, labor productivity and labor intensity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 52(10), pages 1618-1634.
    20. Fernando Aragon & Diego Restuccia & Juan Pablo Rud, 2021. "Heterogeneity, Measurement Error, and Misallocation in African Agriculture: A Comment," Working Papers tecipa-697, University of Toronto, Department of Economics.
    21. K. L. Krishna & J. V. Meenakshi, 2022. "Agricultural Productivity Growth and Structural Transformation in Rural India: Some Recent Evidence," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(1), pages 277-302, September.
    22. Shuai Qin & Hong Chen & Tuyen Thi Tran & Haokun Wang, 2022. "Analysis of the Spatial Effect of Capital Misallocation on Agricultural Output—Taking the Main Grain Producing Areas in Northeast China as an Example," Sustainability, MDPI, vol. 14(10), pages 1-17, May.
    23. Heng Zhang & Xiangyu Guo, 2024. "Farmland Rental Market, Outsourcing Services Market and Agricultural Green Productivity: Implications for Multiple Forms of Large-Scale Management," Land, MDPI, vol. 13(5), pages 1-23, May.
    24. Yang Xu & Yujia Huo & Xiangyu Guo, 2024. "Relationship of Arable Land Scale and High-Quality Development of Farmers’ Cooperatives: Evidence from Grain Production Cooperatives in China," Sustainability, MDPI, vol. 16(6), pages 1-30, March.

    More about this item

    Keywords

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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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