Smallholder and large-scale agriculture : are there tradeoffs in growth and equity?

Thus, a smallholder strategy is at once equitable and efficient. Based on evidence from Kenya and Malawi, this paper documents that the reverse is true in East Africa. Yields per hectare are greater on large than on small farms. When total factor productivity is considered, however, smallholders are as efficient as large farms. The yield differential between large- and small-scale production is a result both of inadequate access of small farmers to factors of production and their limited ability to undertake risk, due in part to the emphasis they place on subsistence. Large farms, on the other hand, are able to achieve higher yields per hectare as a result of their greater ability to mobilize factors of production and to undertake risk. This paper points to the need for a number of policy actions to foster more repid growth in smallholder productivity. First, it is necessary to ensure equal access by all households to land, rights to grow crops, and opportunities to sell crops in the same markets regardless of farm size or income. Second, programs targeted toward smallholders need to develop a much better understanding of the precise constraints facing small farmers than have past rural development projects. Third, in forming public policy it is critical to recognize that, although a smallholder strategy tends to be efficient in the long run, even the well-designed strategy is likely to involve "gestation lags" in realizing its benefits, because the need to alleviate a complex set of constraints on small farms leads to tradeoffs in growth and equity in the short run. To minimize such tradeoffs, it is critical that the market and nonmarket factors that constrain the mobilization of labor and other factors of production by small farmers be better understood. A focus on small-farm development may also require more explicit recognition by donors of the need to pay for recurrent costs and the inevitability of slower short-run growth. (Author abstract)