Abstract
Whether the negative relationship between farm size and crop productivity that is confirmed in a large global literature holds in Africa is of considerable policy relevance. Plot-level data from Rwanda point toward constant returns to scale and a strong negative relationship between farm size and crop output per hectare that is robust across specifications and emerges also if profits with family labor valued at shadow wages are used but disappears if family labor is valued at market rates. In Rwanda, labor market imperfections, rather than other unobserved factors, seem to be a key reason for the inverse farm-size productivity relationship. <i>(JEL O13, Q15)</i>
Highlights
A recurring finding in the literature on agricultural production has been the existence of an inverse relationship between the size of a farm’s operated area and its productivity
To promote efficient and sustainable use of scarce land resources for agricultural development, the country put in place a three-pronged National Land Policy that (i) promotes land use planning to free up land for agricultural investors and non-agricultural development; (ii) aims to consolidate land to achieve ‘economic’ plot sizes; and (iii) prohibits any subdivision that would result in parcel sizes below one hectare
Results suggest that (i) technology is characterized by constant returns to scale; (ii) even after controlling for land quality, yields, labor intensity and shadow profits per hectare are all much higher on small farms; and (iii) profit per hectare is virtually identical across holding and plot sizes
Summary
A recurring finding in the literature on agricultural production has been the existence of an inverse relationship between the size of a farm’s operated area and its productivity. To promote efficient and sustainable use of scarce land resources for agricultural development, the country put in place a three-pronged National Land Policy that (i) promotes land use planning to free up land for agricultural investors and non-agricultural development; (ii) aims to consolidate land to achieve ‘economic’ plot sizes; and (iii) prohibits any subdivision that would result in parcel sizes below one hectare As such measures were not uncontroversial and proved to be difficult to implement in other settings, an empirical review of the underlying assumptions seems warranted. Results suggest that (i) technology is characterized by constant returns to scale; (ii) even after controlling for land quality, yields, labor intensity and shadow profits per hectare are all much higher on small farms; and (iii) profit per hectare (with labor valued at market rates) is virtually identical across holding and plot sizes.
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