Farm Size and Land Use Efficiency in Pakistan's Agriculture (Report‪)‬

In this paper we analyzed the relationship between the farm size and economies of scale in the extensive and intensive use of land. We found that the definition of farm size in terms of linear aggregation of the irrigated and unirrigated lands leads to the misspecification bias, resulting in the under-estimation of the degree of homogeneity of the functions. The implications of the above analysis are fairly obvious. First of all, the one-dimensional definition of farm size in terms of total land size without distinguishing between the irrigated and the unirrigated lands not only mis-specifies the functional relationships between farm size, on the one hand, and land use and other economic variables, on the other hand; but, more importantly, it also under-estimates the returns to scale value, thereby leading to over-estimation of possible benefits from the re-distribution of land. Secondly, the division of lands into irrigated and unirrigated brings out the importance of irrigation in determining the levels of the extensive and intensive uses of land and goes a long way in explaining the inter-farm size as well as the intra-farm size variations in land use intensities. Thirdly, explicit estimates of the positive impact of irrigation on land use and productivity clearly indicate that there is an alternative policy for radical land reforms to bring about significant changes in the distribution of agricultural income and assets. That alternative policy is to use irrigation development and distribution, which are predominantly under the direct or indirect control of the government, as policy tools to help the small and marginal farmers. INTRODUCTION