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Exploring the relationship between farm size and productivity: Evidence from the Australian grains industry

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  • Sheng, Yu
  • Chancellor, Will

Abstract

The effect of farm size on productivity remains to be one of the longest standing debates in the agricultural development literature. In this paper, we use farm level data for the Australian grains industry from 1989 to 2004 to investigate the relationship between farm size and total factor productivity and its potential determinants. We show that a positive farm-size productivity relationship could be linked to farmer capital choice. In particular, the productivity advantage of larger farms is likely to diminish as farms use contract services to replace self–owned capital, suggesting that the hire of capital services (hereafter ‘capital outsourcing’) may lift the productivity level of small farms compared to their larger counterparts.

Suggested Citation

  • Sheng, Yu & Chancellor, Will, 2019. "Exploring the relationship between farm size and productivity: Evidence from the Australian grains industry," Food Policy, Elsevier, vol. 84(C), pages 196-204.
    • Handle: RePEc:eee:jfpoli:v:84:y:2019:i:c:p:196-204
    DOI: 10.1016/j.foodpol.2018.03.012
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    References listed on IDEAS

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    1. Barrett, Christopher B., 1996. "On price risk and the inverse farm size-productivity relationship," Journal of Development Economics, Elsevier, vol. 51(2), pages 193-215, December.
    2. Sheng, Yu & Davidson, Alistair & Fuglie, Keith & Zhang, Dandan, 2016. "Input Substitution, Productivity Performance and Farm Size," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(3), July.
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    4. Yu Sheng & Shiji Zhao & Katarina Nossal & Dandan Zhang, 2015. "Productivity and farm size in Australian agriculture: reinvestigating the returns to scale," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(1), pages 16-38, January.
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    6. Lamb, Russell L., 2003. "Inverse productivity: land quality, labor markets, and measurement error," Journal of Development Economics, Elsevier, vol. 71(1), pages 71-95, June.
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    8. Sheng, Yu & Zhao, Shiji & Nossal, Katarina & Zhang, Dandan, 2015. "Productivity and farm size in Australian agriculture: reinvestigating the returns to scale," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(1), January.
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    10. Sheng, Yu & Gray, Emily M. & Mullen, John D., 2011. "Public investment in R&D and extension and productivity in Australian broadacre agriculture," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100712, Australian Agricultural and Resource Economics Society.
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    More about this item

    Keywords

    Agricultural productivity; Farm size; Contract service; Capital outsourcing;
    All these keywords.

    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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