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Wage growth, landholding, and mechanization in agriculture : evidence from Indonesia

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  • Yamauchi, Futoshi

Abstract

This paper uses farm panel data from Indonesia to examine dynamic patterns of land use, capital investments, and wages in agriculture. The empirical analysis shows that an increase in real wages has induced the substitution of labor by machines among relatively large farmers. Large farmers tend to increase the scale of operation by renting in more land when real wages increase. Machines and land are complementary if the scale of operation is greater than a threshold size. In contrast, such a dynamic change was not observed among relatively small holders, which implies a divergence in the movement of the production frontier between Java and off-Java regions given that the majority of small farmers are concentrated in Java.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6789.

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Date of creation: 01 Feb 2014
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Handle: RePEc:wbk:wbrwps:6789

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Keywords: Rural Development Knowledge&Information Systems; Regional Economic Development; Rural Poverty Reduction; Labor Policies; Crops and Crop Management Systems;

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  1. Fumio Hayashi & Edward C. Prescott, 2008. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 573-632, 08.
  2. Dwayne Benjamin & Loren Brandt, 2000. "Property Rights, Labor Markets, and Efficiency in a Transition Economy: The Case of Rural China," Working Papers benjamin-00-02, University of Toronto, Department of Economics.
  3. Foster, Andrew D. & Rosenzweig, Mark R., 2010. "Is There Surplus Labor in Rural India?," Working Papers 85, Yale University, Department of Economics.
  4. Keijiro Otsuka, 2013. "Food insecurity, income inequality, and the changing comparative advantage in world agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 44(s1), pages 7-18, November.
  5. Otsuka, Keijiro & Liu, Yanyan & Yamauchi, Futoshi, 2013. "Factor endowments, wage growth, and changing food self-sufficiency: Evidence from country-level panel data," IFPRI discussion papers 1246, International Food Policy Research Institute (IFPRI).
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