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Do family farms really converge to a uniform size? The role of unobserved farm efficiency

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  • Yuval Dolev
  • Ayal Kimhi

Abstract

We analyse the growth of family farms in Israeli cooperative villages during a period of economic turmoil. We use instrumental variables to account for the endogeneity of initial farm size, and correct for selectivity as a result of farm survival. We also include a technical efficiency index, derived from the estimation of a stochastic frontier production model, as an explanatory variable. Our aim is to check whether ignoring efficiency could have been the reason for convergence results obtained elsewhere in the literature. We found that technical efficiency is an important determinant of farm growth, and that not controlling for technical efficiency could seriously bias the results. In particular, larger farms are found to grow faster over time, while without controlling for technical efficiency the farm growth process seemed to be independent of initial farm size. The increasing polarisation of farm sizes in Israel has ramifications for the inefficiencies induced by the historical quota system, for the political power of the farm sector and for the social stability of farm communities. Copyright 2010 The Author. Journal compilation 2010 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.

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  • Yuval Dolev & Ayal Kimhi, 2010. "Do family farms really converge to a uniform size? The role of unobserved farm efficiency ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 119-136, January.
    • Handle: RePEc:bla:ajarec:v:54:y:2010:i:1:p:119-136
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    4. Zheng, Yanan & Goddard, Ellen W. & Qiu, Feng, 2018. "Exploring the Effect of Disease Outbreaks on Farm Structure Change: A Dynamic Analysis for Canadian Pig Industry," 2018 Annual Meeting, August 5-7, Washington, D.C. 273801, Agricultural and Applied Economics Association.
    5. Kimhi, Ayal & Tzur, Nitzan, 2011. "Long-Run Trends in the Farm Size Distribution in Israel: The Role of Part-Time Farming," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114759, European Association of Agricultural Economists.

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