The costs and benefits of land fragmentation of rice farms in Japan*

Land fragmentation, in which a farm operates multiple, separate plots of land, is a common phenomenon in Japan and many other countries. Usually, land fragmentation is regarded as a harmful phenomenon as it increases production costs and reduces the advantages of scale economies. However, it is also known that fragmentation may have beneficial effects in reducing risk through spatial dispersion of plots. Thus, land fragmentation has both costs and benefits, and whether it is beneficial or harmful is determined by the magnitude of these costs and benefits. This article investigates the costs and benefits of land fragmentation empirically using panel data from Japanese rice farms. The empirical results reveal that fragmentation increases production costs and offsets economies of size, and these impacts strengthen as farm size increases. Moreover, although fragmentation does reduce production risk, its monetary value is far below the cost of land fragmentation. From these findings, we conclude that land fragmentation is an impediment to efficient rice production in Japan.