12 to 21 Q/ha but the incidence of improved seed use stagnated at 3% -compared to 58% commercial farmswhile that of fertilizer increased from 29% to 43% using fertilizer in this crop. Sorghum area shrunk from 0.3 ha to 0.2 ha, yields increased from 11 to 21 Q/ha, and an increase of fertilizer use -from 15% to 22%narrowed the gap to commercial farms (23%). Yet, with 0.2% of smallholders vs. 15% of commercial farms using improved seeds, enormous differences remain. Smallholder area and yield of teff, the country’s most important crop,<sup>12</sup> rose from 0.14 to 0.31 ha and from 6 to 13 Q/ha, respectively. Yet, compared to 73% and 69% of commercial farmers who use fertilizer and improved seed, smallholders’ use of fertilizer increased (20% to 45%) to almost reach parity with large farms while seed use remains at 4%.

# **3.2 Changes in proximity to and area cultivated by large farms**

To justify our identification strategy that relies on intertemporal changes in distance between smallholders and all or a specific type of large farms, we show that there is considerable variation in distance to the next large farm or total large farm area within a certain interval also at the crop level. Figure 3 displays the cumulative distribution of the distance from the kebele centroid to the nearest commercial farm growing the specified crop for the four crops in our regression sample. It illustrates that for all crops, the largest shift, corresponding to territorial expansion of large farms, is observed in the 2004-08 period and that post2008 large farm expansion is most pronounced for sorghum, followed by wheat and teff with very little further in the distance from the average kebele centroid to the next farm.

Mapping large farms with certain crop and sample kebeles in 2004 and 2014 with buffers around the former in figures 4-11 highlights the dynamics and geography of large farm expansion. Commercial maize farms spread from the center leaving only kebeles in Gambella and Tigray at a distance of more than 150 km from the next large farm. In 2004, large sorghum farms were clustered in Oromia, eastern Afar, and the northwest of Amhara spilling into Tigray. Although fewer than maize, their number had expanded greatly by 2014. Teff is a smallholder crop which, in 2004, had been grown only in the central highlands and a large farm in Afar. Large wheat farms expanded from Southern Amhara and Oromia (as well as northern SNNPR) in 2004 to cover virtually the entire Oromia and considerable parts of SNNPR and southern Amhara.

To assess whether, beyond simple presence, large farm area in smallholders’ vicinity increased, providing a potential source for crop-specific spillovers, table 4 presents the share of kebeles with at least one large farm cultivating the same crop within 0-25, 25-50, and 50-100 km together with large farm area devoted to this crop in any of our distance bands. For maize, sorghum, teff, and wheat, 63%, 41%, 57%, and 50% of the kebeles producing the relevant crop had at least one large farm within 50 km. In 2003/4 to 2013/4, the share of kebeles within 0-25, 25-50, or 50-100 km from a maize growing commercial farm increased from

> 12 It is grown on 2.7 mn. ha by 6.3 mn. farmers and a total value of production of 1.6 bn US$ and a commercial surplus of close to 500 mn. USD, as important as sorghum, maize, and wheat together and only slightly less than coffee.

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