Consolidation policies and small-farm agriculture in northwest Portugal

Abstract

This paper discusses linkages between land policy and structural change on small farms in northwest Portugal. Policy has attempted to increase farm incomes through land consolidation programs, legal limits on fragmentation, and regulations that allow credit for land purchase to be used only for consolidation. This paper uses a profit maximization model to show that the farmer's benefits from consolidation are positively related to the capacity utilization of own-labor and capital resources. If farm resources are under-employed, the gains from consolidation are reduced. Empirical data for small farms in Portugal show that gains from consolidation are small in comparison to the gains from growth in farm size, even if growth entails increasing fragmentation. In this circumstance, consolidation policies serve only to exclude some small farmers from opportunities for income growth. Copyright 1992 by Oxford University Press.