Farm Size, Technical Efficiency, and Environmental Performance: Evidence From Rice Production in China

ABSTRACT Farm size, as well as technical and environmental efficiency in agriculture, is key to food security and sustainable development. However, empirical evidence about how heterogeneity across farm sizes is associated with the joint production of desirable outputs and undesirable by‐products remains limited, preventing our understanding of technical and environmental efficiency. Using country‐representative survey data on rice production in China from 2014 to 2018, we estimate farm‐level technical and environmental efficiency by employing a by‐production function combined with a stochastic meta‐frontier approach, accounting for heterogeneous technology across farm sizes. Our findings reveal considerable room to improve both technical and environmental performance, and the extent of both differs markedly by farm size. Medium‐sized farms (2–6.67 ha) exhibit the highest meta‐frontier technical efficiency, whereas large farms (6.67–33.33 ha) achieve the highest meta‐frontier environmental efficiency. The estimated shadow prices indicate that the mean marginal abatement cost of nitrogen pollution is 129.233 yuan/kg. We also identify a range of farm‐scale factors, such as technical training, land consolidation, higher educational attainment, and cooperative membership, which are significantly associated with higher levels of technical and environmental efficiency in rice farming. Counterfactual simulations further indicate that combining farm‐size‐specific measures could enhance meta‐frontier technical and environmental efficiency. In particular, cooperative participation is positively associated with technical and environmental performance among smallholders, while high‐level education and technical training are more impactful at large farms. Land fragmentation is consistently associated with lower efficiency and wider technology gaps across farm sizes. Our findings underscore the importance of designing farm‐size‐specific policies and implementing integrated interventions in promoting sustainable agricultural development.