The rationality of farm size growth: An example from ‘white’ South Africa

Abstract

The author examines whether farmers respond reasonably efficiently to market signals, or whether their decision-making about farm expansion is based upon nonmarket principles. Four approaches to this problem are outlined. The first makes inferences from aggregate income data. The second estimates earnings functions. The third tests the hypothesis of economies of scale. The fourth examines farmers' long-term plans econometrically. These methods are applied in the context of commercial agriculture in South Africa. It appears that expansion is undertaken for rational economic reasons. It is concluded that the costs of interventions to alter farm sizes may be considerable. Copyright 1989 by Oxford University Press.