Market Access, Farm Structure, and Agricultural Productivity: Unraveling the “Little Divergence” in the Habsburg Empire

This paper examines how market access and land concentration affected agricultural productivity in the late 19th-century Habsburg Empire. By utilizing new cross-sectional data and employing an instrumental variable approach, this paper demonstrates that market access positively affected agricultural productivity, while land concentration had a negative impact. Exploring the mechanism, this paper finds that market access enhanced productivity by promoting the use of machinery capital, increasing the utilization of wage labor, and facilitating a shift from pastoral agriculture to barn feeding. The negative effects of land concentration were mostly caused by a decrease in labor intensity and limited use of draft animals. While large estates were more inclined to mechanize than family farms, their preference for labor-extensive agriculture more than outweighed the productivity benefits from mechanization. In contrast, family farms reaped significant benefits from market access. They effectively utilized surplus family labor and adopted labor-intensive and land-saving technologies like barn-feeding, which boosted their productivity levels.