Assessing the impacts of land fragmentation and plot size on yields and costs: A translog production model and cost function approach

More attentions should be focused on the changes in plot size of each household rather than the size of farmland in the discussions of economic problem of land fragmentation in China. This study empirically analyzes the impact of land fragmentation and plot size on yields, along with average costs, using household survey data collected from the Jiangsu province in China. A detailed and careful translog production model and cost function are employed to understand and analyze these problems. The empirical results reveal that there are increasing returns to scale in agricultural production. Land fragmentation reduces yields through changes in marginal outputs of agricultural inputs. Especially in areas with high opportunity costs of labor, the negative impact is more obvious. A one-unit increase in the Simpson index leads to a 39% increase in the average cost, whereas a one-unit increase in plot size leads to an 8% decline in the average cost. Thus, moderate expansion of the size of the plot can reduce the average cost, implying that agriculture can achieve economies of scale within each plot. Economies of scale should be developed by keeping farm size constant, reducing the number of plots, and expanding the size of each plot. We suggest that economies of scale can be achieved in each plot by either land consolidation or land transfer as well as by joint farming and joint association.