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Are small farms really more productive than large farms?

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  • Fernando Aragon

    (Simon Fraser University)

  • Diego Restuccia

    (University of Toronto)

  • Juan Pablo Rud

    (Royal Holloway, University of London)

Abstract

This paper shows that using yields may not be informative of the relationship between farm size and productivity in the context of small-scale farming. This occurs because, in addition to productivity, yields pick up size-dependent market distortions and decreasing returns to scale. As a result, a positive relationship between farm productivity and land size may turn negative when using yields. We illustrate the empirical relevance of this issue with microdata from Uganda and show similar findings for Peru, Tanzania, and Bangladesh. In addition, we show that the dispersion in both measures of productivity across farms of similar size is so large that it renders farm size an ineffective indicator for policy targeting. Our findings stress the need to revisit the empirical evidence on the farm size-productivity relationship and its policy implications.

Suggested Citation

  • Fernando Aragon & Diego Restuccia & Juan Pablo Rud, 2021. "Are small farms really more productive than large farms?," Discussion Papers dp21-11, Department of Economics, Simon Fraser University.
  • Handle: RePEc:sfu:sfudps:dp21-11
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. Marijn A. Bolhuis & Swapnika R. Rachapalli & Diego Restuccia, 2021. "Misallocation in Indian Agriculture," NBER Working Papers 29363, National Bureau of Economic Research, Inc.
    5. Britos, Braulio & Hernandez, Manuel A. & Robles, Miguel & Trupkin, Danilo R., 2020. "Land market distortions and aggregate agricultural productivity: Evidence from Guatemala," IFPRI discussion papers 1969, International Food Policy Research Institute (IFPRI).
    6. 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).

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    More about this item

    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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