Farm size and the determinants of productive efficiency in the Brazilian Center-West

This paper explores the determinants of technical efficiency, and the relationship between farm size and efficiency, in the Center-West of Brazil. This is the region where agricultural production and total factor productivity have grown the fastest since 1970. It is also a region characterised by unusually large farms. Technical efficiency is studied with Data Envelopment Analysis and county level data disaggregated by farm size and type of land tenure. The efficiency measure is regressed on a set of explanatory variables which includes farm size, type of land tenure, composition of output, access to institutions and indicators of technology and input usage. The relationship between farm size and efficiency is found to be non-linear, with efficiency first falling and then rising with size. Type of land tenure, access to institutions and markets, and modern inputs are found to be important determinants of the differences in efficiency across farms.