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Rising wages, mechanization, and the substitution between capital and labor: evidence from small scale farm system in China

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  • Xiaobing Wang
  • Futoshi Yamauchi
  • Jikun Huang

Abstract

This article aims to investigate major factors that led to the observed pace of mechanization and the substitution between labor and machines in rural China. We used commodity-wise province-level panel data for more than a quarter of a century from 1984 to 2012. The analysis demonstrated a dramatic increase in real agricultural wages in recent years, especially after 2003, in contrast to a relatively stable real machine price. The relative price of machines against agricultural labor has declined in an accelerating way, which contributed to the observed rapid introduction of machines. The elasticity of substitution between labor and machines was large in some commodities, which contributed to a fast substitution of labor by machines.

Suggested Citation

  • Xiaobing Wang & Futoshi Yamauchi & Jikun Huang, 2016. "Rising wages, mechanization, and the substitution between capital and labor: evidence from small scale farm system in China," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 309-317, May.
  • Handle: RePEc:bla:agecon:v:47:y:2016:i:3:p:309-317
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    File URL: http://hdl.handle.net/10.1111/agec.12231
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    References listed on IDEAS

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    Cited by:

    1. Bhattarai, Madhusudan & Joshi, Pramod Kumar & Shekhawa, R. S. & Takeshima, Hiroyuki, 2017. "The evolution of tractorization in India’s low-wage economy: Key patterns and implications," IFPRI discussion papers 1675, International Food Policy Research Institute (IFPRI).
    2. Yu Xu & Liangjie Xin & Xiubin Li & Minghong Tan & Yahui Wang, 2019. "Exploring a Moderate Operation Scale in China’s Grain Production: A Perspective on the Costs of Machinery Services," Sustainability, MDPI, Open Access Journal, vol. 11(8), pages 1-17, April.
    3. Gong, Binlei, 2020. "New Growth Accounting," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304348, Agricultural and Applied Economics Association.
    4. Zhichao Xue & Lin Zhen, 2018. "Impact of Rural Land Transfer on Land Use Functions in Western China’s Guyuan Based on a Multi-Level Stakeholder Assessment Framework," Sustainability, MDPI, Open Access Journal, vol. 10(5), pages 1-21, April.
    5. Hisatoshi Hoken & Qun Su, 2018. "Measuring the effect of agricultural cooperatives on household income: Case study of a rice‐producing cooperative in China," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 831-846, October.
    6. Chen, Huang, 2017. "Agricultural Risk, Insurance, and the Land-productivity Inverse Relationship," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258212, Agricultural and Applied Economics Association.
    7. Takeshima, Hiroyuki & Hatzenbuehler, Patrick L. & Edeh, Hyacinth O., 2020. "Effects of agricultural mechanization on economies of scope in crop production in Nigeria," Agricultural Systems, Elsevier, vol. 177(C).
    8. Xiaoshi Zhou & Wanglin Ma & Gucheng Li, 2018. "Draft Animals, Farm Machines and Sustainable Agricultural Production: Insight from China," Sustainability, MDPI, Open Access Journal, vol. 10(9), pages 1-16, August.
    9. Wang, Xiaobing & Huang, Jikun & Rozelle, Scott, 2017. "Off-farm employment and agricultural specialization in China," China Economic Review, Elsevier, vol. 42(C), pages 155-165.
    10. Chen, H., 2018. "Can Crop Insurance Market Benefit Land Rental Market by Mitigating the Inverse-Relationship Concern," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277003, International Association of Agricultural Economists.
    11. Binlei Gong, 2020. "New Growth Accounting," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 641-661, March.
    12. Guy M. Robinson & Bingjie Song, 2018. "Transforming the Peri-Urban Fringe in China: The Example of Xi’an-Xianyang," Sustainability, MDPI, Open Access Journal, vol. 10(11), pages 1-17, October.
    13. Tsusaka, Takuji W. & Orr, Alastair & Msere, Harry W. & Homann-KeeTui, Sabine & Maimisa, Penias & Twanje, Gift H. & Botha, Rosemary, 2016. "Do Commercialization and Mechanization of a “Women’s Crop” Disempower Women Farmers? Evidence from Zambia and Malawi," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235885, Agricultural and Applied Economics Association.
    14. Hoken, Hisatoshi, 2017. "Development of off-farm employment and its determinants in rural China," IDE Discussion Papers 633, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    15. Gong, Binlei, 2020. "Agricultural productivity convergence in China," China Economic Review, Elsevier, vol. 60(C).

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