The Impact of Pro-Small Farmland Policies on Agricultural Productivity Gaps

This study investigates how agricultural policy distortions cause countries to deviate from optimal production levels, thereby widening agricultural productivity gaps both within and between nations. Using the Leontief production function under a comparative framework, we examine how country-specific national endowments shape agricultural policies, bringing about varied misallocations and distinct agricultural productivity gaps across countries. Developing countries typically misallocate excessive labor to farmland, resulting in small-scale farming, whereas developed countries often allocate surplus capital to farmland, favoring large-scale operations. This divergence in resource allocation not only widens agricultural productivity gaps within nations but also amplifies them between developing and developed countries.