Agricultural labor markets and the inverse plot size–productivity relationship: Evidence from China's apple growers

Abstract

The size–productivity relationship and the reasons for the relationship had puzzled researchers and policymakers for decades. As rural internal labor markets had gradually developed in China, influencing mechanisms of agricultural labor markets on land size–productivity relationship were worth being deeply analyzed. Two main contributions to the existing literature were that: (1) owing to the labor-intensive production characteristics, better-developed rural internal labor markets, and fewer measure errors in self-reported plot size and production, apple growers were used to analyze the plot size–productivity relationship and the reasons for the relationship in rural China for the first time; (2) the household fixed-effect model was used to remove the impacts of household-level unobservable variables, and positive impact of labor input on agricultural productivity was analyzed. The empirical results from 1163 plot-level data indicated that: (1) when labor input was not included, the inverse plot size–productivity relationship was robust for apple growers; (2) agricultural labor input was a key reason for the inverse plot size–agricultural productivity relationship; (3) transaction costs of participating in agricultural labor markets influenced the inverse plot size–productivity relationship by changing the amount of labor input. This line of study was conducive to improving the efficiency of rural internal labor markets and increasing agricultural productivity.