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Inverse Productivity or Inverse Efficiency? Evidence from Mexico

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  • Justin Kagin
  • J. Edward Taylor
  • Antonio Yúnez-Naude

Abstract

Using a unique panel data set from rural Mexico, we find strong evidence of a negative relationship between farm size and both productivity and technical efficiency: large farms not only have a lower value of output per hectare than small farms, they also produce further from the efficiency frontier. Our findings suggest that, in spite of the ongoing transformation of agricultural supply chains and economists’ recommendations for small farmers to exit crop production, there may be sustained advantages for smallholder farms. Our analysis offers new insights into inverse-farm size relationship, the productivity–efficiency relationship, and the use of stochastic frontier techniques.

Suggested Citation

  • Justin Kagin & J. Edward Taylor & Antonio Yúnez-Naude, 2016. "Inverse Productivity or Inverse Efficiency? Evidence from Mexico," Journal of Development Studies, Taylor & Francis Journals, vol. 52(3), pages 396-411, March.
    • Handle: RePEc:taf:jdevst:v:52:y:2016:i:3:p:396-411
    DOI: 10.1080/00220388.2015.1041515
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    References listed on IDEAS

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    1. Prabhu Pingali & Yasmeen Khwaja & Madelon Meijer, 2005. "Commercializing Small Farms: Reducing Transaction Costs," Working Papers 05-08, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
    2. Pingali, Prabhu & Khwaja, Yasmeen & Meijer, Madelon, 2005. "Commercializing small farms: reducing transaction cost," ESA Working Papers 289070, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    3. Rachel Griffith, 2001. "Product market competition, efficiency and agency costs: an empirical analysis," IFS Working Papers W01/12, Institute for Fiscal Studies.
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