Are Small Farms Really More Productive than Large Farms?

56 Pages Posted: 30 Sep 2019 Last revised: 25 Feb 2022

See all articles by Fernando M. Aragon

Fernando M. Aragon

Simon Fraser University (SFU) - Department of Economics

Diego Restuccia

University of Toronto - Department of Economics

Juan Pablo Rud

University of London, Royal Holloway College - Department of Economics

Date Written: September 2019

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

Aragon, Fernando M. and Restuccia, Diego and Rud, Juan Pablo, Are Small Farms Really More Productive than Large Farms? (September 2019). NBER Working Paper No. w26331, Available at SSRN: https://ssrn.com/abstract=3461500

Fernando M. Aragon (Contact Author)

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Diego Restuccia

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

Juan Pablo Rud

University of London, Royal Holloway College - Department of Economics ( email )

Royal Holloway College
Egham
Surrey, Surrey TW20 0EX
United Kingdom

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