Wage growth, landholding, and mechanization in agriculture : evidence from Indonesia
AbstractThis 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 InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6789.
Date of creation: 01 Feb 2014
Date of revision:
Rural Development Knowledge&Information Systems; Regional Economic Development; Rural Poverty Reduction; Labor Policies; Crops and Crop Management Systems;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2014-03-15 (Agricultural Economics)
- NEP-ALL-2014-03-15 (All new papers)
- NEP-EFF-2014-03-15 (Efficiency & Productivity)
- NEP-SEA-2014-03-15 (South East Asia)
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