Using the evolution of knowledge to explain changes in farm size distribution and specialization

Abstract

This study developed a theoretical model to explain the consolidation of farmland and specialization in agriculture. In the model, farmers are assumed to be endowed with knowledge regarding the production of each crop, which evolves through learning. Knowledge across crops is substitutable to various degrees. The farm size distribution and specialization are shown to be equilibrium outcomes determined by the distribution of knowledge. A simulation example based on farm-level acreage data from California is presented to show the relevance of learning mechanisms and test model implications.