Is There a Farm-Size Productivity Relationship in African Agriculture? Evidence from Rwanda

Whether the negative relationship
between farm size and productivity that is confirmed in a
large global literature holds in Africa is of considerable
policy relevance. This paper revisits this issue and
examines potential causes of the inverse productivity
relationship in Rwanda, where policy makers consider land
fragmentation and small farm sizes to be key bottlenecks for
the growth of the agricultural sector. Nationwide plot-level
data from Rwanda point toward a constant returns to scale
crop production function and a strong negative relationship
between farm size and output per hectare as well as
intensity of labor use that is robust across specifications.
The inverse relationship continues to hold if profits with
family labor valued at shadow wages are used, but disappears
if family labor is rather valued at village-level market
wage rates. These findings imply that, in Rwanda, labor
market imperfections, rather than other unobserved factors,
seem to be a key reason for the inverse farm-size
productivity relationship.