Are small farms really more productive than large farms?

Improving worldwide food production and food security is a major challenge, especially in light of climate change and for lower income countries where agriculture is a key source of livelihood. In the Global South for example, the agricultural sector accounts for up to 30 per cent of gross domestic product and 60 per cent of employment.

Simon Fraser University (SFU) Economics Professor Fernando Aragón conducts research in the fields of developmental, environmental and political economics. His work explores the role of natural resources and institutions on local development, the economic effects of pollution and adaptation to climate change. He is especially interested in the way these factors affect rural households in the Global South.

Aragón conducted a study on farm productivity of more than 4,000 farming households in Uganda over a five-year period. The study considered farm productivity based on land, labour and tools as well as yields per unit area of cultivated land. His findings suggested that even though yields were higher for smaller farms, farm productivity was actually higher for larger farms. Similar research in Peru, Tanzania and Bangladesh supported these findings.  

The study, Are small farms really more productive than large farms? co-authored with Diego Restuccia (University of Toronto) and Juan Pablo Rud (Royal Holloway, University of London) was published in Food Policy.

Aragón explains that many features of the economic environment factor into farming, which implies that farm size cannot be an effective instrument for policies aiming to address low agricultural productivity. He recommends that policymakers and development economists take note of this research to better understand the relationship between farm size and productivity. 

We spoke with Professor Aragón about his research.

Can you explain the difference between farm yields and farm productivity—and how you measured that difference?

Yields are the amount of output per acre of land. It is useful to assess how much output would change if we change only the amount of land, but keep everything else constant. Formally, it is an indicator of land productivity.

In contrast, farm productivity refers to the ability of a farmer to transform inputs into output. Given the same amount of inputs, like land and labor, a high productivity farm can produce more output. Farm productivity is a better measure of a farmer’s technology or expertise. However, it is more difficult to measure since it requires more data on input use and other factors than can affect output such as weather and prices.

Are we to understand that small farms may yield more product, but labour and other inputs are more intensive? Thus, to produce the same amount smaller farms work harder at it than larger ones?
Yes. Our research shows that many small farms produce more output per unit of land (high yield) than larger farms—but they achieve that not because they are more productive, but by using more labour and other inputs. This implies that their production costs are higher.

Tell us about some of the features of the economic environment that factor into farming. Do you have suggestions on how policies can help increase productivity?

Our findings actually highlight an important problem with agriculture in less developed countries: there are too many small, low-productivity farms. If more productive farmers could buy or lease part of their land, then they could produce more and increase both aggregate productivity and income. In practice, this does not happen due to imperfections in input markets or distortionary policies, which in some cases prevent land consolidation.

In your research on this topic, you have likely encountered some novel ideas, business models and ways to support small farms. Do you have any advice for farmers—and how we can support them?

Unfortunately, I have no advice for farmers—but, our research does have important implications for the design of agricultural policies. Most of these policies are built under the assumption that small farms are more productive. Thus, they foster small-scale agriculture, for instance by providing subsidies to small farmers, or preventing land consolidation. Our empirical findings, do not support this assumption and lead to opposite policy recommendations. That is, elimination of size-based policies and facilitation of land transactions.

Fernando Aragón received funding from the Social Sciences and Humanities Research Council (SSHRC) of Canada.

For more visit The Conversation: Are small farms the solution to food insecurity? Uganda study shows policies can get it wrong.