Reference no: EM131274444

A widely observed feature of backward agriculture is the inverse relationship between farm size and productivity; that is, larger farms tend to produce lower output per acre than smaller farms. Brief sketches of two alternative explanations for this phenomenon are provided in (a) and (b) below. Elaborate on these arguments, using appropriate diagrams if necessary.

(a) It has been suggested that smaller farms chiefly use family labour for cultivation, whereas larger farms rely more heavily on hired labour. Due to significant rates of unemployment in many rural labour markets, the opportunity cost of family labour may be much lower than the market wage. This may induce small farms to apply more labour per acre relative to large farms.

(b) The following sketch is an alternative "Malthusian" explanation. More fertile land, by providing an abundant source of food, causes families surviving off such land to grow very large. As children in such families become independent adults, the land tends to get fragmented, creating smaller farm sizes.

(c) Compare these two proposed explanations in terms of (i) direction of causality and (ii) policy implications with respect to redistribution.