Economic efficiency and returns to scale of communal area agriculture in Zimbabwe and implications for agrarian reform

The first half of the twentieth century saw the creation of a dualistic agrarian structure in Zimbabwe with European settlers occupying the choicest land while the indigenous population was displaced into marginal areas. There is a large body of literature that supports the inverse relationship between farm size and efficiency, implying that the small, low-input communal area farms could be more efficient than the large commercial farms. But unavailability of data, among other reasons, makes it impossible to compare the efficiency levels of communal area and commercial farms.;To determine the options for alleviating poverty in the communal areas, this study seeks to establish the nature of returns to scale and level of economic efficiency of communal area farms. Then household characteristics, resource endowments and other farm-level factors are used to explain the variation in farm-level measures of economic inefficiency. Generalized, multi-product translog cost functions were found to be more appropriate than production functions in handling the data collected by the Ministry of Agriculture during the 1988/89, 1989/90 and 1992/93 seasons.;The estimated cost functions exhibited decreasing returns to scale. A one percent increase in all inputs would increase output by about 0.34, 0.25 and 0.72 percent during the seasons 1988/89, 1989/90 and 1992/93, respectively. This suggests that there are increasingly limited productivity gains if the supply of all farm inputs is raised at current technology levels.;Measures of economic inefficiency were obtained from cost frontiers estimated assuming the distribution of the one-sided error term to be half-normal or exponential. The average measures of economic inefficiency for the three seasons were between 11 and 27 percent. The minimum and maximum values were 10 to 13 percent, 12 to 46 percent and 10 to 21 percent for 1988/89, 1989/90 and 1992/92, respectively. Thus, on average, a program to eliminate inefficiency on communal farms would reduce costs by 16 percent which is unlikely to significantly change living standards in communal areas. Household characteristics, resource endowments and farm-level factors were not significant in explaining the variation in farm-level inefficiency. These results supported the recommendation that a carefully planned and targeted technology development and transfer program is needed to raise productivity and incomes in Zimbabwe's communal areas.