a considerable magnitude when talking about national food supply. Finally

　　The study examines the potential for unintended adverse impacts of land consolidation on farm productivity and evaluates the degree to which insurance can mitigate the adverse impacts. Land consolidation may lower productivity and output if, as found in the literature, an inverse relationship exists between farm-size and yield. A farm-household model is developed to identify an "Income Share Effect" (ISE), which provides a new risk-based explanation rooted in the Chinese context for the inverse relationship. The prevalence of very small plots implies that most farm households have surplus labor and dedicate significant time to non-farm activities. As farm size increases, farmers shift labor away from low-risk, off-farm activities and devote more time to risky farming. Land consolidation and the creation of a class of commercial family farms thus increases the share of household income at risk and leads larger farmers to behave more conservatively in farming decisions. In the absence of insurance markets, the land reform policies may thus achieve the goal of land consolidation but at a cost of lower productivity. The introduction of a perfect crop insurance offsets the inverse relationship as larger farmers are able to protect their specialized agricultural portfolio. The study empirically exams for the existence of the inverse relationship in the absence of insurance: a 1 mu increase in farm size causes a 1.6 yuan/mu decrease in the value of yields. This implies that if average land size increases from the sample mean in 2013, which is 67mu/farm, to 100mu/farm in China, total production would decrease by 3%, a considerable magnitude when talking about national food supply. Finally, the availability of crop insurance has a significant positive impact on productivity, allowing farmers to “recover” the productivity lost due to the inverse relationship.