Reconsidering Conventional Explanations of the Inverse Productivity-Size Relationship

38 Pages Posted: 30 Sep 2008 Last revised: 24 May 2011

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Marc F. Bellemare

University of Minnesota - Twin Cities - Department of Applied Economics

Janet Y. Hou

Cornell University

Date Written: June 13, 2009

Abstract

The inverse productivity-size relationship is one of the oldest puzzles in development economics. Two conventional explanations for the inverse relationship have emerged in the literature: (i) factor market imperfections that cause cross-sectional variation in household-specific shadow prices and thereby induce variation in input application rates; and (ii) the omission of soil quality measurements that are inversely correlated with farm or plot size but positively associated with yields. This study uniquely employs precise soil quality measurements at the plot level with multiple plots per household so as to allow testing of both conventional explanations simultaneously. Our empirical results show that, in these data, only a small portion of the inverse productivity-size relationship is explained by market imperfections and none of it seems attributable to the omission of soil quality measurements.

Keywords: Inverse Relationship, Productivity, Market Failures, Soil Characteristics, Sub-Saharan Africa, Madagascar

JEL Classification: D24, O12, O13, Q12

Suggested Citation

Barrett, Christopher B. and Bellemare, Marc F. and Hou, Janet Y., Reconsidering Conventional Explanations of the Inverse Productivity-Size Relationship (June 13, 2009). World Development, Vol. 38, No. 1, 2010. Available at SSRN: https://ssrn.com/abstract=1275353

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

Marc F. Bellemare (Contact Author)

University of Minnesota - Twin Cities - Department of Applied Economics ( email )

MN
United States

Janet Y. Hou

Cornell University ( email )

Ithaca, NY 14853
United States

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