The growth of farms

Bojnec, Štefan and Fertő, Imre (2021) The growth of farms. POST-COMMUNIST ECONOMIES. ISSN 1463-1377

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Abstract

This article describes an investigation of the relationship between farm size and the growth of farms. Theories about the association between farm size and the growth of farms give mixed results by country and over time. The former relationship is tested by assessing the validity of Gibrat's Law for Hungarian and Slovenian farms in the period 2007-2015. The use of a sample of farms from Farm Accountancy Data Network datasets makes it necessary to avoid biases due to heterogeneous structures across farming systems. Thus, we use quantile regressions to control for farm-size-related heterogeneity in the samples. Results suggest rejection of the validity of Gibrat's Law for farms in Hungary and to a lesser extent for Slovenian farms when the growth of farms is measured by growth of output per farm (where smaller farms grew faster than the largest farms), but not in the case of an increase in farm inputs (i.e. land and labour per farm). We provide evidence for Hungarian farms that smaller, mostly individual farms grew faster than larger, mostly corporate farms throughout the period of analysis.

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