The inverse productivity-size relationship is one of the oldest puzzles in development economics. Two conventional explanations for the inverse relationship have emerged in the literature: (i) factor market imperfections that cause cross-sectional variation in household-specific shadow prices and (ii) the omission of soil quality measurements. This study employs precise soil quality measurements at the plot level with multiple plots per household so as to test both conventional explanations simultaneously. Empirical results show that only a small portion of the inverse productivity-size relationship is explained by market imperfections and none of it seems attributable to the omission of soil quality measurements.
Bibliographical noteFunding Information:
Seniority of authorship is shared equally. The authors’ names are listed alphabetically. We thank Jean Claude Randrianarisoa, Jhon Rasambainarivo, and our FOFIFA colleagues for invaluable data assistance, the USAID BASIS CRSP, funded through the University of Wisconsin-Madison, for financial support for data collection, and Keith Shepherd and his laboratory at ICRAF for performing the soil analyses. We are also grateful to David Just, Loren Tauer and participants at the 2008 Center for the Study of African Economies conference at Oxford for useful comments and suggestions. Any remaining errors are ours.
- inverse relationship
- market failures
- soil characteristics
- sub-Saharan Africa