Question

Farm size Hypothesis short notes​

Answer 1

Answer:

1. The most important explanation advanced in this regard, is in terms of the low opportunity cost of family labour and the resultant variations in the amount of labour input used on different size classes of farms.

It is based on the argument that the smaller farms, characterized by peasant family cultivation, extend the input of labour right upto the point where the marginal product of labour is zero (i.e., point P in the accompanying diagram) or at least much below the ruling market wage rate. On the larger farms, the use of hired labour stops at the level (OC in the diagram) where its marginal product equals the market wage. Hence the smaller farms have higher.

Marginal Value Productivity and Labour Units

This argument (put forth by Sen) based on the low opportunity cost of family labour on small farms is not sufficient to explain the inverse relationship on the following grounds:-

(i) If the peasant family farming and capitalist farming (hiring bulk of its labour) co-exist, one can argue that the opportunity cost of peasant family labour is the wage that is determined in the market through the employment of labour by various capitalist farmers and that the peasant family will try to equalize its opportunity cost of work in self-employment and wage earnings. In other words, a small farmer will not consider his labour as available at zero price it the capitalist farms also exist in the region.

(ii) Peasant family farmers even at the bottom of the scale, hire labour at the margin and even derive income from employment of family labour in alternative occupations.

(iii) Inverse relationship holds even when the larger farms (i.e., the farms using mainly hired labour) alone are ranked.

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