The Size Distribution of Farms and International Productivity Differences

Abstract

Using internationally comparable data from the World Agricultural Census, we document a factor of 36 difference in average farm size between rich and poor countries. Small farms of less than 2 hectares represent more than 70% of farms in poor countries but only 15% in rich countries, whereas large farms of more than 20 hectares represent none of the farms in poor countries and almost 40% in rich countries. Two questions emerge. First, what explains the striking differences in farm size across countries? Second, are farm-size differences important in understanding agricultural and aggregate productivity gaps across countries? We develop a two sector model with agriculture and non-agriculture that features a non-degenerate size distribution of farms. The theory embeds a Lucas (1978) span-of-control model of farm size into a standard sectoral model with non-homothetic preferences. In the model calibrated to the United States, a reduction in economy-wide productivity from 1 to 1/4 produces an increase in the share of employment in agriculture from 2.5% to 53%, a 21-fold reduction in average farm size, and a 25-fold reduction in agricultural labor productivity. These results are broadly consistent with data on the sectoral allocation of labor and the size distribution of farms across countries.JEL classification: O11, O14, O4.

Delinking Land Rights from Land Use: Certification and Migration in Mexico

“…This adds to the literature on property rights which focuses on investment and increased access to credit as key pathways between rural land reform and economic growth (Galiani and Schargrodsky 2011). The importance of agricultural labor productivity in explaining variation in aggregate output across countries suggests that enhancing agricultural labor productivity and allowing for consolidation of farmland into larger units can have large effects on growth (Restuccia, Yang, and Zhu 2008;Adamopoulos and Restuccia 2014). Our results indicate that removing the constraints to labor allocation and land transactions through property rights reforms that delink land rights from land use is one way to achieve this.…”

The Misallocation of Land and other Factors of Production in India

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Property rights and the first great divergence: Europe 1500–1800

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