Working Papers on Economics - Farm Size Distribution, Weather Shocks, and Agricultural Productivity
The series Working Papers on Economics is published by the Office for Economic Studies at the Banco de la República (Central Bank of Colombia). It contributes to the dissemination and promotion of the work by researchers from the institution. This series is indexed at Research Papers in Economics (RePEc).
On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. The works published are provisional, and their authors are fully responsible for the opinions expressed in them, as well as for possible mistakes. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Banco de la República or its Board of Directors.
The series Working Papers on Economics contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc). The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.
Abstract
This paper studies the dynamics of farm size distribution, how they are in uenced by weather shocks, and the implications for aggregate productivity. Using data from several developing countries, we first document new empirical facts about households' landholding choices and how weather shocks in uence these decisions. Building on a rich longitudinal dataset for Colombia on farm sizes, land transactions, and households' consumption and investment decisions, we then show that weather shocks increase the frequency of land sales and reduce farm sizes within municipalities, especially among smaller farms. To rationalize these facts, we develop a dynamic, heterogeneous household model in which uninsured farmers make landholding and occupational choices. Our calibrated model shows that uninsured risk substantially curbs aggregate agricultural productivity, and that the effects of temporary weather shocks on farm size and agricultural output are highly persistent, taking more than a
decade to fade out.
Climate shocks increase land sales, leading to greater land fragmentation, especially among small farms. This increases the number of farmers in municipalities affected by the shocks, with a predominance of smaller farms.
