Peer review

In the leading explanations for the oft‐observed inverse relationship (IR) between farm size and productivity in developing country agriculture, labour market imperfections have commonly occupied a central role. However, an emerging literature suggests that disparities in technical or allocative efficiency may be driving productivity differentials. Using nationally‐representative panel data from Nicaragua, we develop and employ a four‐stage empirical framework to simultaneously test the competing explanations for the IR. While efficiency differences exert a significant impact on all productivity indicators, their explanatory power is insufficient to rule out labour market imperfections as the driving force behind the relationship.

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