2 FROM SUBSISTENCE TO PROFIT


large farms to reflect the idea that optimal farm size is a dynamic concept that changes as a country’s overall econ- omy grows and as nonagricultural sectors develop. Within this framework, interventions must be tailored to the differ- ent types of smallholder farms and the specific contexts in which they operate. Te backdrop to the debate on small versus large farms


is the dominance of smallholder farming systems in the developing world. Worldwide about half a billion farms are smaller than 2 hectares, and these farms are geting smaller in many countries (Figure 1) (Hazell et al. 2007). Te con- tinuing decline is due to factors such as growing rural popu- lation, urban growth that is not labor intensive, formal and informal barriers to rural-urban migration, and distortion- ary land policies. Small farms are estimated to produce four- fiſths of the developing world’s food (FAO 2011). Moreover, they are home to approximately two-thirds of the world’s 3 billion rural residents, the majority of people living in abso- lute poverty, and half of the world’s undernourished people (IFPRI 2005). To get a beter understanding of the role that smallhold-


ers play in a country’s development, it is important to first look at the broader context of agricultural development. Growth in agriculture has been shown to be an important part of the initial stage of transformation in many countries.


Agricultural growth can provide the economy with much- needed stimuli such as capital, labor, and foreign exchange to finance and fuel growth in nonagricultural sectors (see, for example, de Janvry and Sadoulet 2009). Te connection is not automatic, however, and varies according to country- specific circumstances, especially the country’s potential for agricultural and nonagricultural (including minerals and manufacturing) sources of growth (Hazell et al. 2010). Past successes in promoting agricultural development, such as the Green Revolution in Asia, were grounded in inter- ventions and reforms that supported equitable agricultural growth and were led by small farms (Hazell 2009). Policies that enabled smallholder participation in the Green Revolu- tion included the equitable distribution of land and secure ownership and tenancy rights, alongside scale-neutral tech- nologies, temporary input subsidies, and large investments in infrastructure (such as roads and irrigation). A large body of empirical research argues that there


are efficiency benefits to small farms. Studies have shown a strong inverse relationship between farm size and land productivity, with smaller farms generating higher per-unit farm output than larger farms (for a summary, see Heltberg 1998). Te standard explanations for this inverse relation- ship focus on small farms’ more intensive use of inputs and the lower costs associated with supervising family labor


FIGURE 1 Trends in farm size in selected developing countries


2 3 4 5 6 7 8


Source: FAO (2000, 2010); Fan and Chan-Kang (2003).


Ethiopia 1977


Ethiopia 1989–1992 Ethiopia 2001–2002 Egypt 1990


Egypt 1999–2000 Malawi 1969 Malawi 1993 China 1980 China 1999 Indonesia 1973 Indonesia 1993 Indonesia 2003 India 1971 India 1991


India 2010–2011 Nepal 1992 Nepal 2002


Pakistan 1971–1973 Pakistan 1989 Pakistan 2000 Philippines 1971 Philippines 1991 Philippines 2002 Thailand 1978 Thailand 1993 Thailand 2003


Average farm size (hectares)


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