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Re-examining the inverse relationship between farm size and efficiency

Author

Listed:
  • Gucheng Li
  • Zhongchao Feng
  • Liangzhi You
  • Lixia Fan

Abstract

Purpose - – Whether there exists an inverse relationship (IR) between farm size and its efficiency remains a hotly debated question among agricultural economists. In most studies to date, farm efficiency is measured by land productivity. Thus, the IR actually measures the relationship between farm size and land productivity. The purpose of this paper is to examine and understand the IR from a novel angle by using multiple definitions of farm efficiency indicators like labor productivity, profit ratio, total factor productivity (TFP) and technical efficiency (TE). Design/methodology/approach - – By using the farm-level panel data from Hubei province in China from 1999 to 2003, this paper employs the two-way fixed effect model of panel data and the stochastic frontier analysis of Battese and Coelli model to investigate the relationship between farm size and its production efficiency derived from the multiple definitions of production efficiency indicators including land productivity, labor productivity, profit ratio, TFP and TE. Findings - – The study confirmed the IR between land productivity and farm size, as in many formal studies. However, the relationship between farm size and other agricultural efficiency indicators may be positive, negative or uncorrelated at, depending on how the farm efficiency is defined. Therefore, the paper concluded that the relationship between farm size and its production efficiency is mixed. This paper provides economic explanations for the IR through the comprehensive study using the expansion of agricultural efficiency indicators. Practical implications - – Because different agricultural efficiency indicators have different policy implications for China's future agricultural and land policy, the findings have tremendous policy implications, particularly in terms of the current debate on large or small farm development strategy, the also so-called “go big or small” agricultural strategy. In this sense, the Chinese household responsibility system has played a critical role in its agriculture and will continue to play a critical role in terms of social security and social equality. Any reform to this system should proceed with caution. Originality/value - – While most existing studies only try to explain the IR from the perspective of land productivity, this paper attempts to propose a novel angle to examine the IR by using multiple definitions of agricultural efficiency and hopes to find some new conclusions.

Suggested Citation

  • Gucheng Li & Zhongchao Feng & Liangzhi You & Lixia Fan, 2013. "Re-examining the inverse relationship between farm size and efficiency," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 5(4), pages 473-488, November.
  • Handle: RePEc:eme:caerpp:v:5:y:2013:i:4:p:473-488
    DOI: 10.1108/CAER-09-2011-0108
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    Citations

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    Cited by:

    1. Msangi, Haji Athumani, 2017. "Examining The Inverse Relationship Between Farm Size And Efficiency In Tanzanian Agriculture," Research Theses 276448, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Gaetano Perone, 2020. "The impact of agribusiness crimes on food prices: evidence from Italy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(3), pages 877-909, October.
    3. Zhang, Jian & Mishra, Ashok K. & Hirsch, Stefan, 2021. "Market-oriented agriculture and farm performance: Evidence from rural China," Food Policy, Elsevier, vol. 100(C).
    4. Bendeza Ccanto, Jessica & Condori, Chura Julissa & Lozada-Urbano, Michelle, 2022. "Proximate, microbiological analysis and digestibility of pepsin in atta sexdens flour, from the region of Rioja, Perú," African Journal of Food, Agriculture, Nutrition and Development (AJFAND), African Journal of Food, Agriculture, Nutrition and Development (AJFAND), vol. 22(10).
    5. Yi Lou & Guanyi Yin & Yue Xin & Shuai Xie & Guanghao Li & Shuang Liu & Xiaoming Wang, 2021. "Recessive Transition Mechanism of Arable Land Use Based on the Perspective of Coupling Coordination of Input–Output: A Case Study of 31 Provinces in China," Land, MDPI, vol. 10(1), pages 1-27, January.
    6. Wang, Xiaolong & Chen, Yuanquan & Sui, Peng & Yan, Peng & Yang, Xiaolei & Gao, Wangsheng, 2017. "Preliminary analysis on economic and environmental consequences of grain production on different farm sizes in North China Plain," Agricultural Systems, Elsevier, vol. 153(C), pages 181-189.
    7. Mensah-Bonsu, Akwasi & Sarpong, Daniel Bruce & Al-Hassan, Ramatu & Asuming-Brempong, Samuel & Egyir, Irene S. & Kuwornu, John K. M. & Osei-Asare, Yaw B., 2017. "Intensity of and factors affecting land and water management practices among smallholder maize farmers in Ghana," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 12(2), June.
    8. Jian Zhang & Ashok K. Mishra & Peixin Zhu, 2021. "Land rental markets and labor productivity: Evidence from rural China," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(1), pages 93-115, March.
    9. Wang, Qian & Li, Fan & Heerink, Nico & Yu, Jin & Fleskens, Luuk & Ritsema, Coen J., 2023. "Land Rental Markets, Specialization and Rural Household Income: Evidence from the North China Plain," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(3), September.
    10. Cheng, Shen & Bravo-Ureta, Boris E. & Zheng, Zhihao & Sun, Hao, 2017. "Land Consolidation, Productivity and Technical Efficiency: Evidence from a Cross Section of Farm Households in China," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258533, Agricultural and Applied Economics Association.
    11. Isabel Dinis, 2019. "The Concept of Family Farming in the Portuguese Political Discourse," Social Sciences, MDPI, vol. 8(7), pages 1-15, July.
    12. Zhang, Jian & Mishra, Ashok K. & Hirsch, Stefan & Li, Xiaoshun, 2020. "Factors affecting farmland rental in rural China: Evidence of capitalization of grain subsidy payments," Land Use Policy, Elsevier, vol. 90(C).
    13. Keijiro Otsuka, 2021. "Changing Relationship between Farm Size and Productivity and Its Implications for Philippine Agriculture," Discussion Papers 2102, Graduate School of Economics, Kobe University.

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