Is bigger better? Evidence from olive-grove farms in Andalusia
2018
Colombo, S. | Perujo-Villanueva, M. | Ruz-Carmona, A.
Farming in the European Union is characterized by small agricultural holdings. The olive grove is not an exception to this situation: the main European olive oil producers, Spain, Italy and Greece, have farms with an average size of just 5.8, 1.8 and 1.5 ha, respectively. Small agricultural holdings in olive groves typically bear less favourable production conditions in term of labour costs, land fragmentation and structural capital than larger agricultural holdings. These conditions are reflected in higher production costs, which reduce the competitiveness of these holdings, leading to progressive exclusion from domestic and international markets and the abandonment of farming. In this paper, we analyse the effects of farm size on the production costs of olive growers in the province of Jaén (Andalusia, Spain), to measure empirically the benefits that would accrue to olive-grove farmers from enlarging their holdings. Our results indicate that larger farms benefit from economies of scale that significantly reduce production costs, thanks to more efficient use of machinery and lower depreciation costs. This effect is very large for small farms (5 ha), although is very significant even for larger farms.
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