Wage Growth, Landholding, and Mechanization in Chinese Agriculture

Abstract

Summary. -This paper aims to examine the dynamics of land transactions, machine investments, and the demand for machine services using farm panel data from China. Recently, China's agriculture has experienced a large expansion of machine rentals and machine services provided by specialized agents, which has contributed to mechanization of agricultural production. On the other hand, the empirical results show that an increase in non-agricultural wage rates leads to expansion of self-cultivated land size. A rise in the proportion of non-agricultural income or the migration rate also increases the size of self-cultivated land. Interestingly, however, relatively educated farm households decrease the size of self-cultivated land, which suggests that relatively less educated farmers tend to specialize in farming. The demand for machine services has also increased if agricultural wage and migration rate increased over time, especially among relatively large farms. The results on crop income also support complementarities between rented-in land and machine services (demanded), which implies that scale economies are arising in Chinese agriculture with mechanization and active land rental markets.

The future of small farms in Asia

“…Thus, the massive creation of nonfarm jobs to absorb rural population by offering lucrative wages is necessary to realise significant farm size expansion. The importance of non-agricultural wages to attract rural labour to nonfarm sectors can be clearly seen in the case of China (Wang et al, 2014), as shown in Figure 6. In 2000 the relationship between non-agricultural wage and migration rate (that is, the ratio of the number of migrants to the number of working age rural workers) is not so clear, except for high-wage areas.…”

“…Moreover, it is interesting to observe large variations in real wage growth across major regions (Table 4). Yamauchi (2014) examines the dynamically changing patterns of land use, capital investments and real wages by using farm panel data from seven provinces collected in 2007 and 2010. The regression analysis shows that an increase in real wages has induced the substitution of labour by machines, notably among relatively large farmers.…”

“…Migration rate (%) and non-agricultural wage inChina, 2000 and 2008 Notes: Migration rate refers to proportion of household members residing outside their villages, whereas non-agricultural wage is hourly wage in Chinese yuan deflated to the 2000 value. Source:Yamauchi et al (2014).…”

Migration, Schooling Choice, and Student Outcomes in China

“…CLP, like their migrant counterparts in urban areas, are able to return from school each day to their parents. However, although each rural household in China has access to cultivated land (both through contracts with the village and through rental agreements), the average operational size of a farm is only 0.6 hectares (NBSC 2014;Wang et al 2016). Hence, given the nature of China's small-scale farming sector, when husband and wife both live at home (or one spouse lives at home and the other migrates), family income can be significantly lower than when both parents migrate to cities.…”

Agricultural reforms and bridging the gap for rural China

“…While the optimal farm size will depend on various elements including topography and production mix, some farm consolidation may improve the scope for mechanisation and vertical integration of production. With significant increases in farm wages over recent years, the incentives for substituting capital for labour have risen (Wang et al, 2014a). Some of the benefits of consolidation have been captured through strong growth in farmer professional cooperatives and equipment rental services in China.…”