The Rapid Rise of Cross-Regional Agricultural Mechanization Services in China

Although Adam Smith (1776) and Alfred Marshall (1920) emphasized the gains from specialization that arise from the division of labor, their focus was on the manufacturing sector. Both saw farming as being on too small a scale and bereft of economics of scale, with a market that was too small and local, with too sharp a seasonality, and too quick a succession of tasks to support either the development of a division of labor over the tasks of a cropping season or of mechanization. Smith and Marshall's vision of farming-and its implications for division of labor and mechanization-was manifest again in the 1950s to the present in Asia. Ruttan (2001) puts forward nearly the same ideas and terms as Smith and Marshall, but for contemporary small rice farms in Asia. He emphasizes that the use of machines for the series of short tasks performed on tiny farms would imply costly investment in specialized machines that small farmers would be loath to make. And even if these farmers mechanized, Ruttan posited that it would not induce a segmented and specialized farm labor market as again, the critical mass of demand for each segment would not be present. Otsuka (2012) goes further along these lines to note that only on larger farms would the mechanization investment, at least for large machines, pay off to farmers. Thus the path to efficient mechanization must have as a first step a sharp increase in Asian farm size from the current 1-3 ha average to considerably more. In contrast to this bleak prognosis for the Asian small farm sector to develop a division of labor and to mechanize, here we show that China with farm sizes averaging below one ha, a high degree of land fragmentation, and a decline in labor supply in the countryside since the mid-2000s (Cai and Wang 2008; Zhang, Yang, and Wang 2011) has seen steadily increasing farm output and yields over the past two decades. We argue that the contradiction can, in part, be explained by increasing mechanization. Especially since 2004, there has been rapid farm mechanization in the areas of ownership and rental, plus rapid development of farm mechanization services that combine the provision of specialized labor and the services of large harvesting machines. We focus on the latter services, in particular, their manifestation in the emergence of a cluster of farmer companies that sell harvesting services (as harvesting is the most `heavy' of the tasks) across the provinces of China and throughout the year. By taking advan