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Limitations of yields as a measure of farm productivity: Evidence from Uganda
Together with Diego Restuccia (University of Toronto) and Juan Pablo Rud (University of London), associate professor Fernando Aragon recently penned a commentary piece on VoxDev summarizing the results of their study which highlights the limitation of using yields as a measure of farm productivity in developing countries, and argues that it leads to a misinterpretation of the relationship between farm size and productivity.
An excerpt from the article:
Among developing and poor countries, agriculture remains the dominant source of livelihood despite low agricultural productivity, with shares of employment in agriculture exceeding 50%. It follows that growth in agricultural productivity is key in promoting structural transformation and fighting poverty and food insecurity. Globally, most of the extreme poor live in rural areas and are engaged in small-scale household farming. In this context, countries and international organisations often focus their attention on land policies targeting smallholder farmers.
Policies aiming to reduce land concentration and foster smallholders are partly supported by a large literature documenting a negative relationship between the land size of farms and their ‘yields’ – a measure of land productivity, defined as output per unit of land. The observation was first noted in the late 1930s by Chayanov (1966) in Russian agriculture, later documented by Sen (1962) for India, and subsequently replicated all around the world, becoming one of the most entrenched stylised facts in development economics (Berry and Cline 1979, Barrett et al. 2010, Foster and Rozensweig 2022).
The inverse relationship between farm size and yields has been interpreted as evidence that small farms are more productive than large farms, with consequential policy implications. If small farms are indeed more productive, then policies that encourage small landholdings (such as land redistribution or land ceilings) could increase aggregate productivity and reduce rural poverty. Such measures are also attractive from a policy perspective, since farm size is easily observable, facilitating the implementation of seemingly productivity-enhancing agricultural policies.
In Aragon, Restuccia, and Rud (2022), we highlight the limitation of using yields as a measure of farm productivity in developing countries, and argue that it leads to a misinterpretation of the relationship between farm size and productivity.