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FACTOR MARKET ACTIVITY AND THE INVERSE FARM SIZEPRODUCTIVITY RELATIONSHIP IN TANZANIA

Ayala Wineman and Thomas Jayne ()

No 265405, Feed the Future Innovation Lab for Food Security Policy Research Papers from Michigan State University, Department of Agricultural, Food, and Resource Economics, Feed the Future Innovation Lab for Food Security (FSP)

Abstract: Although the inverse farm size-productivity relationship (IR) is sometimes used to motivate arguments in favor of smallholder-led agricultural development, it remains unclear what drives this relationship. It may be attributed to market imperfections that compel small farms to use land more intensively than large farms. Using a three-wave longitudinal household survey from Tanzania, we examine whether the intensity of the IR is related to local factor market activity for land, labor, credit, and animal and machine traction. The IR is evident in Tanzania, although it disappears when family labor is valued at the prevailing local agricultural wage rate. This suggests that labor market imperfections (possibly linked to other market failures) drive the IR. Furthermore, the IR is significantly weakened in the presence of relatively active markets for most factors of production. This suggests that the IR is at least partly driven by imperfections in rural factor markets, underscoring the importance of strategies to improve the functioning of these markets.

New Economics Papers: this item is included in nep-agr and nep-eff
Date: 2017-10-10
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Working Paper: Factor Market Activity and the Inverse Farm Size-Productivity Relationship in Tanzania (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:miffrp:265405

DOI: 10.22004/ag.econ.265405

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