Farm Size and Productivity Growth in the United States Corn Belt

In recent decades, agricultural production in the U.S. has shifted to larger-scale operations, raising concerns about the economic viability of small and midsized farms. We explore whether economies of scale could have provided an incentive for the consolidation by estimating total factor productivity (TFP) for five size classes of grain-producing farms in the Heartland (Corn Belt). Using quinquennial Agricultural Census data from 1982 to 2012 we also compare TFP growth rates across farms sizes to gain insight into whether observed productivity differences are likely to persist. Our finding of a strong positive relationship between farm size and TFP suggests that the recent consolidation of agriculture production has contributed to aggregate productivity growth. We estimate the extent to which sectoral productivity growth can be attributed to structural change versus other factors including technological change. We also estimate and compare the effects on aggregate TFP of hypothetical policies that raise the productivity of farms of a particular size.