Effect of Farmland Size on Land Productivity and Production Cost and Its Intertemporal Change in China's Major Grain Producing Provinces

Abstract

This study uses a panel data fixed-effects model to analyze the effect of farmland size on production cost and land productivity measured by unit output and unit profit based on the data of 10 counties of 3 major grain-producing provinces in China. The results are as follows: First, farmland size has a significant negative impact on the unit output and production cost, but it has a positive impact on the unit profit, which means that farmland size has not brought an increase in unit output, but it has indeed significantly reduced the production cost and increase the unit profit of grain production. Second, for the impact of the enlargement of farmland size on the grain production, the coefficient of virtual variables changes shows an inverted “U-shaped” curve in the models of output and profit, while the coefficients represent a “U-shaped” curve in the production cost model, and the turning points fall within 1∼1.333 ha, which shows that the appropriate areas of grain production should be 1∼1.333 ha. Third, the inverse influence of farmland size on unit output and production cost is weakening over time, which indicates that the problem of diminishing effects of farmland size improves with the introduction of favorable policies and the gradual improvement of rural market factors. Still, the advantages of cost efficiency also gradually decrease.