Relationship between farm size and land productivity: Evidence from Vietnam

A substantial body of empirical literature documents an inverse relationship between farm size and land productivity, particularly in settings characterized by abundant family labor, imperfect labor and land markets, limited access to mechanization, and weak managerial and supervisory capacity. However, ongoing structural transformation in rural Vietnam, marked by declining family labor availability, expanding access to mechanization services, and deeper market integration, calls for a re-examination of this relationship. This paper investigates the association between farm size and land productivity using primary survey data from 988 rice-producing households in the Mekong River Delta (MRD) of Vietnam. To address potential endogeneity in farm size, we employ an instrumental-variable approach that exploits variation in households’ distance to commune administrative centers. The empirical results reveal a positive and statistically significant relationship between farm size and land productivity, exhibiting diminishing marginal returns to land expansion. The estimated effects are modest in magnitude, reflecting Vietnam-specific production conditions, including severe land fragmentation, near-universal irrigation coverage, and widespread access to service-based mechanization, which allow smallholders to sustain relatively high productivity levels. Further analysis indicates that productivity gains from land consolidation are concentrated at early stages of farm expansion, while additional increases in scale yield limited returns in the absence of complementary investments in farm management capacity and well-functioning input and service markets. Overall, the findings suggest that land consolidation can support productivity growth in Vietnam’s rice sector, but its effectiveness depends critically on accompanying institutional and market reforms rather than land expansion alone.