4.5 Article

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

Journal

AGRICULTURAL ECONOMICS
Volume 47, Issue 3, Pages 309-317

Publisher

WILEY
DOI: 10.1111/agec.12231

Keywords

Wage growth; Labor; Mechanization; Crops; China

Funding

  1. National Natural Sciences of China [71373255, 71333013]
  2. Institute of Geographic Sciences and Natural Resources Research, CAS [2012RC102, 2012ZD208]
  3. Chinese Academy of Sciences [KSZD-EW-Z-021-1, Y02015004]

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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.

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