This study identifies several factorsthat inhibit efficiency improvements in the farming sector,both in themselves and through the dynamics of their mutualinteraction. The study observes that incentives faced in thelabor market have important implications for the landstructure and, and in many ways, are at the heart of theproblem of low labor productivity in agriculture. The studyfinds that, while rural households are increasinglydiversifying their income sources out of farming, they havenot moved away from rural areas because of the incentives tohold onto small agriculture plots and because of the highcosts of formal employment outside agriculture. Instead,households have increasingly relied on so-called unearnedincome (pension benefits and other social transfers) andsettled for informal employment in rural areas. This hasdone little to advance the social condition of ruralhouseholds, or to improve agricultural productivity. Thisincentive to hold onto small agricultural plots, as well asother factors limiting the availability of land forcommercial farming, has lead to an increasingly polarizedland structure, with small farms becoming smaller, and largefarms consolidating, albeit slowly.
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