Productive efficiency and farm size in East Africa

Abstract

In this study, we undertake a comparative analysis to re-examine the inverse relationship hypothesis between farm size and land productivity, paying special attention to possible errors in land measurement and the role of technical efficiency (TE). Our primary focus is on the distribution of TE over farm size, so that we may assess the productivity and efficiency relationship with land that has been discussed extensively in the literature. We hypothesize that the distribution of TE over farm sizes is non-linear. To test our hypothesis, we use the Living Standards Measurement Study–Integrated Surveys on Agriculture and a stochastic production frontier with Greene’s (2005) true random effects framework. Specifically, we ask if smaller farms–within the range of farm sizes prevalent in Malawi, Tanzania, and Uganda–are more technically efficient than larger ones after accounting for a number of attributes often ignored such as measures of the production environment, including transportation infrastructure, public extension visits, among other characteristics. The results confirm a robust overall inverse relationship between farm size and land productivity in all three countries. However, the relationship between farm size and TE is positive across some size segments, resulting in a U-shape distribution.