Family farm development, agricultural technical efficiency and farmers’ income

Abstract

This study examines how family farm development is associated with farmers’ income using prefecture-level panel data from China spanning 2013 to 2024. We employ a two-way fixed-effects framework with standard errors clustered at the prefecture-level city, and measure regional agricultural technical efficiency using data envelopment analysis under variable returns to scale (DEA–VRS). The results show a significant positive association between family farm development and farmers' income, though the magnitude is modest. Instrumental variable estimates confirm the robustness of this association, with coefficients significantly larger than ordinary least squares results, revealing a pattern of negative selection in which family farms develop more rapidly in areas with weaker agricultural conditions. Mechanism tests indicate that agricultural technical efficiency serves as a partial mediator, while direct channels play the dominant role. Interaction-based heterogeneity analysis shows that the income-enhancing association is significantly stronger in western, non-major-grain-producing, and economically less-developed regions, consistent with diminishing marginal returns to organizational innovation. The findings provide empirical evidence for understanding the regional income effects of family farm development and inform the design of regionally differentiated policies.