NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Are Small Farms Really more Productive than Large Farms?

Fernando M. Aragon Sanchez, Diego Restuccia, Juan Pablo Rud

NBER Working Paper No. 26331
Issued in September 2019
NBER Program(s):Development Economics Program, Economic Fluctuations and Growth Program, Productivity, Innovation, and Entrepreneurship Program

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.

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Document Object Identifier (DOI): 10.3386/w26331

 
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