Is Small Still Beautiful? Revisiting the Farm-Size Productivity Debate -Sarthak Gaurav and Srijit Mishra
-Working Paper No. 74, Nabakrushna Choudhury Centre for Development Studies, Bhubaneswar
In this paper, we revisit the well-known debate on the inverse relationship between farm-size and agricultural productivity. Using unit level data from Situation Assessment Survey (SAS) of Agricultural Households in the 70th Round National Sample Survey (NSS), we test the relationship between yield (output per hectare) and land operated as well as the relationship between net returns per hectare and land operated for three major crops: paddy, wheat, and cotton. Conditional on several agricultural household characteristics as well as controls for NSS regions, we find a significant inverse relationship irrespective of whether we focus on crop yield or net returns per hectare for the crop. Furthermore, our analysis of farm-size wise patterns of cost of cultivation and net returns from cultivation brings out the issue of high external input intensive agriculture and low absolute net returns of smallholders: two important dimensions of agrarian crisis. As the Indian economy experiences a stunted structural transformation in which the dependence on agriculture for employment remains high and size of farm holdings decline continually, the existence of aninverse relationship between farm-size and agricultural productivity as well as rising cost of cultivation raise concerns about sustainability of smallholder agriculture.
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