Consolidation and productivity in Korean agriculture: Analysis of farm-level panel data

The consensus in Korean agriculture is that expansion of farm landholdings via exit of marginal farmers, a process generally labeled “farm consolidation,” can improve productivity and competitiveness. This dissertation is designed to provide a better understanding of factors affecting farm consolidation and such consolidation's potential impact on productivity in Korean agriculture. This study examines the degree of farm consolidation over the observation period, the factors that have driven growth in farm size and farm exit, and the impact of consolidation on farm efficiency.;This analysis uses a large national farm-level panel data set compiled between the years 1998 and 2002 by the Korean Ministry of Agriculture and Forestry in a national farm survey.;Distributions of land per farm are analyzed to examine the degree and form of farm consolidation. Nonparametric kernel densities are used to test hypotheses regarding the shapes of and differences between farm size distributions.;A second set of findings considers farm growth in relation to initial size. Results indicate that farm growth is not independent of initial farm size.;To account for differences in farm size and growth, several factors—including human capital, farm characteristics, and regional effects—are examined. Necessary instruments in the farm consolidation process are land leasing and the exit of some farmers. Characteristics of farms that lease land and determinants of farm exit are thus examined. Regression estimates reveal that the human capital of farm operators, farm characteristics, and regional characteristics all play important roles in farm size and growth differences, farmland leasing activity, and farm exit decisions.;The effects of farm consolidation on productivity are examined through consolidation's impact on technical efficiency. Results indicate that larger farms are more efficient than smaller ones, and greater human capital leads to higher productive efficiency. The exit of inefficient farms will raise the average productivity of resources remaining in agriculture.;In conclusion, farm characteristics and operator human capital significantly affect the process of farm consolidation, which is achieved through farm exits and transaction of land. Accordingly, farm consolidation improved Korean agricultural productivity over the period 1998 to 2002.