Do fragmented landholdings have higher production costs? Evidence from rice farmers in Northeastern Jiangxi province, P.R. China

Land fragmentation is generally seen as an obstacle to agricultural productivity improvements, but it can also facilitate labor smoothing and risk diversification. In this paper we examine the impact of land fragmentation on the variable production costs of rice farmers in three villages in Jiangxi Province, P.R. China. We find that changes in the number of plots and plot size distribution, as measured by the Simpson index, do not affect total production costs per unit output, but cause a shift between cost categories. Farmers with more and smaller plots tend to use more labor and fewer modern technologies as compared to farmers with fewer and larger plots. Other aspects of land fragmentation, however, do affect total production costs. A reduction of the average distance to plots and an increase in farm size decrease the total production costs per ton. We conclude that land consolidation programs can only contribute to the joint policy goals of increasing agricultural production capacity and reducing the rural labor surplus, if such programs are accompanied by measures aimed at creating alternative market opportunities and at providing appropriate off-farm employment opportunities.