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Farm Size and Productivity Implications of Choice under Uncertainty
T. N. Srinivasan
Sankhyā: The Indian Journal of Statistics, Series B (1960-2002)
Vol. 34, No. 4 (Dec., 1972), pp. 409-420
Published by: Indian Statistical Institute
Stable URL: http://www.jstor.org/stable/25051809
Page Count: 12
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One of the recurring themes in the recent literature on Indian Agriculture is the alleged decline in farm productivity (yield per hectare) as farm size increases. A number of explanations of this phenomenon based on differences in the quantity and quality of inputs as between large and small farms, have been offered in the literature. Some of these explanations depend on imperfections in input markets. An alternative explanation is offered in this paper that attributes the decline in productivity to the optimal response (in terms of inputs used) of a farmer to a situation of uncertainty relating to yield per hectare due to vagaries of weather. It is shown that even in the absence of imperfections in input markets and of differences in quality of land due to differing irrigation facilities, it may still be optimal for a small farmer to use more inputs per hectare (and hence obtain higher expected yield) than a large farmer, provided all farmers have the same utility function for income that exhibits non-increasing absolute and non-decreasing relative risk aversion as income increases. Some remarks on uncertainty and the value of information are also offered.
Sankhyā: The Indian Journal of Statistics, Series B (1960-2002) © 1972 Indian Statistical Institute