The inverse productivity size relationship: can it be explained by systematic measurement error in self-reported production?

This paper revisits the decades-old puzzle of the inverse productivity plot-size relationship (IR), which states that land productivity decrease with increasing plot size in developing countries. While most empirical studies about the IR define yields as self-reported production divided by plot size, this paper complements this approach with an alternative, objective method to estimate yields: crop cuts. Using crop cuts as proxy for yields, the IR in Ethiopia disappears, while the relationship is strong when yields are based on self-reported production. The inverse relationship is even reversed as there exists a weak, positive correlation between plot size and crop cuts. This implies that farmers systematically over report production on small plots and underreport it on larger ones. Our findings suggest that the IR is an artifact of systematic measurement error in self-reported production.