Nicaragua, the Food Crisis, and the Future of Smallholder Agriculture

The 2007-08 world food crisis signaled the necessity of increasing global food supply and revived a long-standing debate surrounding the relationship between productivity/profitability and the size of agricultural landholdings. At the center of the debate, Oxford University's Paul Collier challenged years of empirical work supporting an inverse relationship between farm size and productivity/profitability in developing countries, and called for the increasing implementation of large-scale commercial agriculture and the utilization of scale economies in skills and technology, finance and access to capital, and the organization and logistics of trading. Consisting of three essays, the first two essays of the dissertation seek to empirically address the questions raised by examining the case of Nicaragua. Motivated by the results, the third and final essay then undertakes a theoretical exploration of the efficiency of inequality in the distribution of agricultural landholdings in the wake of the radical restructuring of global agri-food systems. In the first essay, we employ Markov chain methods within an information-theoretic framework so as to provide a refined examination of structural transformation in Nicaragua's agricultural and livestock sector. With stability and perhaps growth as a class of producers, the results indicate that small-scale agriculture does demonstrate a capacity to persist in a globalizing world. In response to these results, in the second essay, we develop a four-stage empirical framework so as to simultaneously investigate the existence and explanation of a robust relationship between farm size and productivity/profitability in Nicaragua. The results of the analysis suggest that labor market imperfections are ostensibly the driving force behind the observed inverse relationship. The third essay, then, outlines an agent-based computational model to explore the efficiency of inequality in the distribution of agricultural landholdings in an agrarian economy characterized by credit and labor market imperfections as well as both traditional and modern value chains. The model illustrates that, in the presence of relatively high fixed costs associated with meeting the quality standards of the modern value chain, a potential equity/efficiency tradeoff emerges thereby suggesting that the pursuit of redistributive land reform may require supplemental policy measures and/or ex ante empirical assessment to determine scope limitations.