TECHNOLOGY, POLICY DISTORTIONS, AND THE RISE OF LARGE FARMS

Abstract

Between 1900 and 2002, mean farm size in the United States tripled; productive resources were increasingly concentrated in large farms. These observations are difficult to explain as results of profit maximization by farmers in a frictionless equilibrium model, given exogenous factor endowment and technology. I show that notable shifts in the farm size distribution coincided with important changes in farm legislation and that farm programs provided larger farms more subsidy per dollar of output produced. These farm-level distortions are crucial for the increasing dominance of large farms but have little impact on employment and productivity in agriculture.