The effects of adopting large farms' agricultural mechanization services on agricultural productivity

Using data from 2,000 farm households in Henan province in China, this study investigates the relationship between large farms' provision of agricultural mechanization services (AMS) and agricultural productivity. The statistics show that 75.02%, 74.12%, and 73.79% of farm households adopt large farms' AMS for ploughing, sowing, and harvesting, respectively. The empirical results indicate that the development of large farms' AMS significantly reduces agricultural productivity. Further analysis reveals that it not only induces smallholder farms to rent out their land, thereby reducing their agricultural income, but also increases their preference for renting out land. Additionally, we find that the machinery assets owned by large farms are of poorer quality than those owned by professional service providers, as demonstrated by the positive impact of the number of combine harvesters owned by professional service providers on farm productivity. Our analysis suggests that, with the structural transformation of the AMS market, Chinese agriculture may experience a period of low efficiency. The government should work on improve the quality of large farms' machinery assets and compensate for the loss of efficiency caused by smallholder farmers' incomplete exit from agriculture.