Considering Technical and Allocative Efficiency in the Inverse Farm Size–Productivity Relationship

Heath Henderson

Journal of Agricultural Economics, 2015, vol. 66, issue 2, 442-469

Abstract: type="main" xml:id="jage12086-abs-0001">

In the leading explanations for the oft-observed inverse relationship (IR) between farm size and productivity in developing country agriculture, labour market imperfections have commonly occupied a central role. However, an emerging literature suggests that disparities in technical or allocative efficiency may be driving productivity differentials. Using nationally-representative panel data from Nicaragua, we develop and employ a four-stage empirical framework to simultaneously test the competing explanations for the IR. While efficiency differences exert a significant impact on all productivity indicators, their explanatory power is insufficient to rule out labour market imperfections as the driving force behind the relationship.

Date: 2015
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