Are smaller farms more productive?1 min read . Updated: 16 Oct 2019, 10:43 PM IST
Agricultural yields are an inaccurate measure of farm productivity as they are affected by market distortions, suggests a new study
Mumbai: Not only are farm sizes in India smaller than in the rest of the world, they are shrinking due to increasing population and competition for land.
Traditionally, in developing countries including India, smaller farms have been associated with greater productivity. This is because it is often perceived that less land allows farmers to use more inputs (such as fertilizer), use the land more intensely (by planting more crops) and adopt more technology.
However, new research from Uganda suggests the opposite: smaller farms may be less productive.
In the study, Fernando M. Aragon Sanchez and others use data from farm production in Uganda to demonstrate that farm productivity is positively related to farm size.
The authors argue that the traditional definition of farm productivity—yield, or output per hectare—only captures land productivity and is often affected by other factors such as subsidies, taxes and land markets.
For instance, they show that in Uganda, in areas where there are stronger property rights for land and fewer market distortions, larger farms are associated with greater yields.
Because of this, the authors suggest measuring farm productivity as farm-specific total factor productivity (the ratio of aggregate output to aggregate input) which accounts for these factors. They warn that using yields as a measure of productivity could lead to erroneous policy recommendations.
More generally, they suggest that these can be issues in other developing countries beyond Uganda.
Sanchez and others recommend that rather than focusing on the relationship between farm size and productivity, agriculture policy should focus on fostering and improving markets, and especially markets for land.
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