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Are Small Farms Really more Productive than Large Farms?

Author

Listed:
  • Fernando Aragon
  • Diego Restuccia
  • Juan Pablo Rud

Abstract

We revisit the long-standing empirical evidence of an inverse relationship between farm size and productivity using rich microdata from Uganda. We show that farm size is negatively related to yields (output per hectare), as commonly found in the literature, but positively related to farm productivity (a farm-specific component of total factor productivity). These conflicting results do not arise because of omitted variables such as land quality, measurement error in output or inputs, or specification issues. Instead, we reconcile the findings emphasizing the role of farm-specific distortions and returns to scale in traditional farm production. We exploit unique regional variation in land tenure regimes in Uganda in evaluating the role of farm-specific distortions. Our findings point to the limited value of yields (or land productivity) in establishing the farm size-productivity relationship. More generally, we demonstrate the limitation of using farm size in guiding policy applications.

Suggested Citation

  • Fernando Aragon & Diego Restuccia & Juan Pablo Rud, 2019. "Are Small Farms Really more Productive than Large Farms?," Working Papers tecipa-647, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-647
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    Keywords

    Farm size; productivity; yields; land markets; distortions; agriculture; policy; regions; technology.;

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • 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
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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