Agricultural mechanization services, adverse selection and by-stage productivity of small farms: Evidence from wheat production in Northern China

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

ACDE Seminar

Date & time

Tuesday 20 February 2024


Acton Theatre JG Crawford Building and Online Zoom


Yu Sheng, Australian National University


Firman Witoelar Kartaadipoetra

The rapid growth of mechanization services has played a crucial role in revolutionizing agricultural production in developing countries where small farms are predominant. However, little is known on how mechanization services impact the productivity of small farms by substituting their own machinery and labor across different stages of production. In this paper, we empirically examine the influence of mechanization services on the productivity of small farms at various stages of production and assess its overall impact at the farm level. We utilize a panel data of 145 wheat farms in Northern China for the period of 2013-2020, which includes comprehensive information on inputs and outputs at each stage of production. Our results show that, after accounting for stage specific characteristics, mechanization services are likely to have a detrimental effect on the productivity of the plant protection stage. Since the plant protection stage is chain-linked with other stages of production, this impedes the further enhancement of capital intensity and productivity at the farm level. These findings provide valuable insights on whether the optimal selection of service providers and service packages based on the stage of production, while satisfying the cost minimization condition for each stage, would be a beneficial strategy for small farm users of mechanization services aiming to enhance productivity.

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