throughout.<sup>17</sup> Table 4 displays levels of productivity by farms in the initial sample that either stayed there or exited and new entrants, those who remained in the sample until 2011 and ‘churners’ who exited before then. Entry and exit seem close linked to productive performance; the 42% incumbents who exited had negative profits per ha (US$ -11.3), compared to US$ 35 for the 17.3% who stayed and US$ 65.5 for the 40% who entered (US$ 94.1 for the 28% who did so permanently and US$ -2.7 for the 12% of churners). Entrants had higher cost (e.g. US$ 289 vs. US$ 146 for exiters and US$ 259 for stayers), suggesting use of more input-intensive technology. This is consistent with successful entrants employing less than average labor in both periods (3.35 workers per 100 ha vs. 4.14 on average in period 1 and 1.81 vs. 2.28 in period 2).

While noticeable, differences in per ha profits in the first period (-15.7 for churners and -12.5 for exiters to 6.7 for stayers and 7.4 for entrants who stayed) were less pronounced than in the second period when 56% of incumbents with an average per ha profit of US$ 77.5 stayed, 20% (with per ha profits of US$ 15.8) exited, and 24% (with profits of US$ 96.1 per ha) entered, 21% (enjoying a profit of US$ 107 per ha) staying until 2011. Compared to the increase in per ha cost, mean initial area operated by entrants decreased over time, from 1,950 h in the first to 1,445 ha in the second period. The fact that their size in both periods was quite small casts further doubt on the validity of the narrative of relentless farm growth driven by economies of scale and motivates detailed analysis.

# **4. Econometric evidence**

We use a farm-level production function to explore the presence of economies of scale and factor market imperfections, and rayon-level data to identify the initial land concentration effect. Some interesting results were produced. First, once rayon- or farm-level fixed effects are accounted for, the production technology exhibits constant returns to scale but imperfections exist in markets for land, agricultural services, and capital assets. Second, initial land concentration affected subsequent performance: a higher share of land cultivated by farms above 3,000 or 5.000 ha at rayon level in 2001 is associated with lower levels of exit and, for the above 5,000-ha share, entry overall and for each of the years separately and productivity growth.

# **4.1 Production function estimates**

We use the data to estimate a standard Cobb-Douglas production function of the form:

> 17 Only 2,898 of the 9,992 incumbent farms in 2001 (or 19% of the entire sample) survived until 2011. By contrast, 41% of incumbent sample farms exited before 2011, 31% entered after 2001 but stayed until 2011, and 9% churned, i.e. entered after 2001 but exited before 2011. While turnover was larger in the first period when only 36% of farms made it to the end as compared to the second when 56% did so, fluctuation is biggest for the smaller farms: in the below 500 ha category, only some 20% of the sample (vs. 50% in the above 5000 has class) remained from 2001 to 2006 and 27% (vs. 73% in the above 5000 has class) from 2007 to 2011.

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