What constrains mechanization in Chinese agriculture? Role of farm size and fragmentation
Abstract Rising real wages create an incentive for relatively large landholders to increase their scale of operations allowing them to mechanize and save labor (or to allow farmers to work more off farm) Using panel data collected in 2000 and 2008 from 951 farm households in 6 provinces in China, the empirical analysis shows that (i) changes in the willingness to pay to rent in land is systematically related to real off farm wage growth and the relationship depends on the initial farm size, and (ii) the introduction of machines to substitute for labor became active in the areas where real wages increased fast but was significantly constrained by land size per plot (and the number of plots) that is, land fragmentation. Our results imply that when real wages rapidly increase and labor shortage becomes serious, fragmented land holdings significantly constrain the decision to mechanize and consolidating fragmented lands can lead to higher efficiency through mechanization.