Can Labor Market Imperfections Explain Changes in the Inverse Farm Size-Productivity Relationship?: Longitudinal Evidence from Rural India

32 Pages Posted: 27 Jun 2016

See all articles by Klaus Deininger

Klaus Deininger

World Bank - Development Economics Group (DEC); World Bank - Development Research Group (DECRG)

Songqing Jin

Zhejiang University - China Academy for Rural Development; World Bank

Yanyan Liu

International Food Policy Research Institute (IFPRI)

Sudhir Singh

World Bank

Date Written: June 24, 2016

Abstract

To understand whether and how inverse relationship between farm size and productivity changes when labor market performance improves, we use large national farm panel from India covering a quarter-century (1982, 1999, 2008) to show that the inverse relationship weakened significantly over time, despite an increase in the dispersion of farm sizes. A key reason was the substitution of capital for labor in response to non-agricultural labor demand. In addition, family labor was more efficient than hired labor in the 1982–1999 period, but not during the 1999–2008 period. In line with labor market imperfections as a key factor, separability of labor supply and demand decisions cannot be rejected in the second period, except in villages with very low non-agricultural labor demand.

Keywords: farm size; farm structure; productivity; agricultural development; labor; markets; inverse farm size-productivity relationship; labor market imperfections; farm size in India

Suggested Citation

Deininger, Klaus and Jin, Songqing and Liu, Yanyan and Singh, Sudhir, Can Labor Market Imperfections Explain Changes in the Inverse Farm Size-Productivity Relationship?: Longitudinal Evidence from Rural India (June 24, 2016). IFPRI Discussion Paper 1358, Available at SSRN: https://ssrn.com/abstract=2801186

Klaus Deininger (Contact Author)

World Bank - Development Economics Group (DEC) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/kdeininger

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Songqing Jin

Zhejiang University - China Academy for Rural Development ( email )

Qizhen Building, Zijingang Campus,ZJU
Hangzhou, Zhejiang 310058
China

World Bank ( email )

1818 H Street N.W.
Washington, DC 20433
United States

Yanyan Liu

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Sudhir Singh

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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