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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.

Suggested Citation

  • Yamauchi, Futoshi, 2014. "Wage growth, landholding, and mechanization in agriculture : evidence from Indonesia," Policy Research Working Paper Series 6789, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6789
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    References listed on IDEAS

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    1. Dwayne Benjamin & Loren Brandt, 2002. "Property rights, labour markets, and efficiency in a transition economy: the case of rural China," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 689-716, November.
    2. Wang, Xiaobing & Yamauchi, Futoshi & Otsuka, Keijiro & Huang, Jikun, 2016. "Wage Growth, Landholding, and Mechanization in Chinese Agriculture," World Development, Elsevier, vol. 86(C), pages 30-45.
    3. Foster, Andrew D. & Rosenzweig, Mark R., 2010. "Is There Surplus Labor in Rural India?," Center Discussion Papers 95273, Yale University, Economic Growth Center.
    4. 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, August.
    5. Keijiro Otsuka & Yanyan Liu & Futoshi Yamauchi, 2013. "Factor Endowments, Wage Growth, and Changing Food Self-Sufficiency: Evidence from Country-Level Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(5), pages 1252-1258.
    6. Yamauchi, Futoshi, 2014. "Wage growth, landholding, and mechanization in agriculture : evidence from Indonesia," Policy Research Working Paper Series 6789, The World Bank.
    7. 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.
    8. Futoshi Yamauchi, 2012. "Prenatal Seasonality, Child Growth, and Schooling Investments: Evidence from Rural Indonesia," Journal of Development Studies, Taylor & Francis Journals, vol. 48(9), pages 1323-1341, September.
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    Cited by:

    1. Martin, William J. & Fukase, Emiko, 2014. "Who Will Feed China in the 21st Century? Income," 2014: Food, Resources and Conflict, December 7-9, 2014. San Diego, California 197164, International Agricultural Trade Research Consortium.
    2. Yamauchi, Futoshi, 2014. "Wage growth, landholding, and mechanization in agriculture : evidence from Indonesia," Policy Research Working Paper Series 6789, The World Bank.

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    More about this item

    Keywords

    Rural Development Knowledge&Information Systems; Regional Economic Development; Rural Poverty Reduction; Labor Policies; Crops and Crop Management Systems;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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