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On The Price Risk And The Inverse Farm Size-Productivity Relationship

  • Christopher BARRETT

    ()

The oft-observed inverse relationship between farm size and productivity is generally explained by labor market imperfections. Although other explanations exist (e.g., size-sensitive cropping patterns and variable soil quality), the literature ignores uncertainty as an explanation. Using a simple two-period model of an agricultural household that both produces and consumes under price uncertainty at the time labor allocation decisions are made, this paper demonstrates analytically that an inverse relationship may exist, even absent any of the more common explanations. A simple data exercise suggests the plausibility of temporal price risk as an explanation for this phenomenon.

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File URL: http://agecon.lib.umn.edu/wis/stpap369.pdf
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Paper provided by University of Wisconsin Madison, AAE in its series Staff Papers with number 369.

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Date of creation: Dec 1993
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Handle: RePEc:wop:wiaesp:369
Contact details of provider: Postal: University of Wisconsin, Dept. of Agricultural and Applied Economics, 427 Lorch Street, Madison, WI 53706
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Fax: 608-262-4376
Web page: http://www.aae.wisc.edu/
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  1. Timmer, C Peter, 1981. "Is There "Curvature" in the Slutsky Matrix?," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 395-402, August.
  2. Carter, Michael R, 1984. "Identification of the Inverse Relationship between Farm Size and Productivity: An Empirical Analysis of Peasant Agricultural Production," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 131-45, March.
  3. Cornia, Giovanni Andrea, 1985. "Farm size, land yields and the agricultural production function: An analysis for fifteen developing countries," World Development, Elsevier, vol. 13(4), pages 513-534, April.
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  7. Stiglitz, Joseph E., 1986. "The new development economics," World Development, Elsevier, vol. 14(2), pages 257-265, February.
  8. Benjamin, Dwayne, 1995. "Can unobserved land quality explain the inverse productivity relationship?," Journal of Development Economics, Elsevier, vol. 46(1), pages 51-84, February.
  9. Waterfield, Charles, 1985. "Disaggregating food consumption parameters : Designing targeted nutritional interventions," Food Policy, Elsevier, vol. 10(4), pages 337-351, November.
  10. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
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  13. Bhalla, Surjit S., 1988. "Does land quality matter? : Theory and measurement," Journal of Development Economics, Elsevier, vol. 29(1), pages 45-62, July.
  14. Epstein, L, 1975. "A Disaggregate Analysis of Consumer Choice under Uncertainty," Econometrica, Econometric Society, vol. 43(5-6), pages 877-92, Sept.-Nov.
  15. Weber, Michael T. & Staatz, John M. & Holtzman, John S. & Crawford, Eric W. & Bernsten, Richard H., 1988. "Informing Food Security Decisions in Africa: Empirical Analysis and Policy Dialogue," Staff Papers 200969, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  16. Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
  17. Greer, Joel & Thorbecke, Erik, 1986. "Food Poverty Profile Applied to Kenyan Smallholders," Economic Development and Cultural Change, University of Chicago Press, vol. 35(1), pages 115-41, October.
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