Can Labor-Market Imperfections Explain Changes in the Inverse Farm Size–Productivity Relationship? Longitudinal Evidence from Rural India

Abstract

The International Food Policy Research Institute (IFPRI), established in 1975, provides evidence-based policy solutions to sustainably end hunger and malnutrition and reduce poverty. The Institute conducts research, communicates results, optimizes partnerships, and builds capacity to ensure sustainable food production, promote healthy food systems, improve markets and trade, transform agriculture, build resilience, and strengthen institutions and governance. Gender is considered in all of the Institute's work. IFPRI collaborates with partners around the world, including development implementers, public institutions, the private sector, and farmers' organizations, to ensure that local, national, regional, and global food policies are based on evidence. IFPRI is a member of the CGIAR Consortium.

Factor Market Activity and the Inverse Farm Size-Productivity Relationship in Tanzania

“…Although these results should be interpreted as correlations and not definitive causal relationships, they are consistent with the notion that the IR is at least partly driven by imperfections in factor markets. This finding is also consistent with other studies that apply different empirical approaches in other settings (Lamb 2003;Deininger et al 2016).…”

“…With more fluid agricultural (and other off-farm) labor markets, these farm-households may be able to sell their excess labor in their rural communities and would therefore divert it from their own farms, resulting in moderated crop yields (see Deininger et al 2016). • Credit: If larger farms are better able to offer suitable collateral (see Kevane 1996), the greater availability of credit might, in the short term, particularly benefit larger farms.…”

“…Frictions in the labor market, such as search or contracting costs, would lend a disadvantage to larger farms (Eswaran and Kotwal 1986). (The tendency for hired labor to shirk and the consequent need for supervision has also been highlighted as a potential disadvantage for large farms (Feder 1985;Eswaran and Kotwal 1986;Deininger et al 2016).) Consequently, in a given setting, small farms have an advantage.…”

“…In rural China in the 1930s, Benjamin and Brandt (1997) find that excess returns to land were highest where factor markets were less developed or less active. In India, Deininger et al (2016) find that the IR has attenuated and maybe even disappeared between 1982 and 2007, and the authors attribute this to an increasingly complete labor market in which the household labor endowment is no longer a strong determinant of on-farm labor demand. A similar pattern of IR attenuation or reversal over time is evident in Vietnam (Liu, Violette, and Barrett 2016) and Indonesia (Yamauchi 2016), although this is somewhat differently attributed to rising agricultural wages (a proxy for heightened factor market activity) and/or the introduction of labor-saving technology, which is favorable to larger farms.…”

Eficiencia y agricultura familiar: más de un siglo de debate sin suficientes respuestas‡

“…After the works cited it is possible to find studies carried out in different parts of the world that seek to contribute empirical evidence about the higher or lower efficiency or productivity (depending on the case) of the small-scale peasant farm in relation to large-scale capitalist agriculture. Among them, it is possible to cite, for example, Savastano and Scandizzo (2017) in Ethiopia and Sub-Saharan Africa, the study by Deininger et al (2016) about how the imperfections in the labor market explain a large part of the inverse relation in India, or a very interesting study by Patnaik (2016), who shows that capitalist agriculture was not present throughout history nor is it now necessarily more productive than peasant agriculture, among others. unidades estudiadas y, al mismo tiempo, toma en consideración a la combinación de todos los insumos que intervienen en la producción (en este caso incluyendo el trabajo y el capital, entendiendo este último en el significado amplio del término).…”