Structural transformation and smallholder agriculture: an information-theoretic analysis of the Nicaraguan case

In light of continued debate regarding the capacity of small-scale agricultural producers to compete amidst globalization and/or liberalization, we examine recent trends in the distribution and use of agricultural landholdings in developing nations via refined exploration of the Nicaraguan case. With nationally-representative, Living Standards Measurement Survey-type data for the years 1998, 2001, and 2005, we employ Markov chain methods within an information-theoretic framework in an attempt to advance the analysis of structural transformation in developing countries beyond the examination of trends in mean farm sizes or Gini coefficients, approaches ill-suited to the detection of the apparent complexities of structural change. Further, while Markov chain analysis has witnessed relatively widespread application in the investigation of structural transformation in developed nations, we offer a novel methodological extension by allowing for the simultaneous exploration of structural transformation across multiple dimensions–namely, structural change in both the distribution and use of agricultural landholdings—as well as the incorporation of microlevel determinants of farm size and land use change. The results of the inquiry, above all, suggest that Nicaragua's agricultural and livestock sector is characterized by a definitive persistence of smallholders. While a moderate tendency toward bifurcation in the distribution of landholdings would appear to obscure any immediate relationship between operational landholdings and land productivity, we contend that such trends are, in fact, consistent with the often observed inverse farm size-productivity relationship.