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Inverse Productivity: Land Quality, Labor Markets, and RiskRussell L. Lamb |
Abstract I test three explanations of the inverse productivity relationship using the ICRISAT data. I reject land quality differences as a cause of the inverse relationship between profits per hectare and farm size. I find that both labor-market imperfections and risk aversion may play a role in explaining the inverse productivity relationship. Smaller farmers use more labor per-hectare than larger farmers, although the relationship is ameliorated somewhat by considering land-quality effects. Risk aversion may cause smaller farmers to over-apply labor to production, but it also fails to fully explain the inverse relationship. Russell L. Lamb is a senior economist at the Federal Reserve Bank of Kansas City. The views expressed herein are solely those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Kansas City or the Federal Reserve System.Back to top RWP home |