CONICET | Buscador de Institutos y Recursos Humanos

Farm size and land allocation are important factors in explaining lagging agriculturalproductivity in developing countries. This paper examines the effect of land market im-perfections on land allocation across farmers and aggregate agricultural productivity. Wedevelop a theoretical framework to model the optimal size distribution of farms and assessto what extent market imperfections can explain non-optimal land allocation and output in-efficiency. We measure these distortions for the case of Guatemala using agricultural censusmicrodata. We find that due to land market imperfections aggregate output is 19% below itsefficient level for both maize and beans and 31% below for coffee, which are three major cropsproduced nationwide. The regions with higher distortions show a higher dispersion in landprices and less active rental markets. We also find that the degree of land market distortionsacross locations co-variate with road accessibility and ethnicity and, in a lower extent, witheducation.