AbstractThe claim that large farms with hired labor undermine community institutions and reduce average welfare while family farms enhance these dimensions is tested in the context of Chile's expanding large‐scale export agriculture. The expected negative effect of scale shows up statistically but then disappears when an appropriate regional control is introduced. However, further analysis reveals a negative rural production effect that withstands this control and sets the stage for a competitive test. The counter hypothesis explored rejects production organization of any size as causal, proposing instead that two dimensions of provincial structure‐urban differentiation and pluralism‐interact with efficient production organization, seen as an ad hoc factor, to determine welfare levels. A partial test of this structural mediation model explains much of the variance of infant mortality (the criterion of welfare). Scale has no e