Mechanization outsourcing clusters and division of labor in Chinese agriculture

Abstract

Journal articleIFPRI3; ISI; CRP2; Capacity Strengthening; D Transforming AgricultureDSGD; PIMPRCGIAR Research Program on Policies, Institutions, and Markets (PIM

Mechanisation Outsourcing and Agricultural Productivity for Small Farms: Implications for Rural Land Reform in China

“…By outsourcing labour and power-intensive production processes (such as harvesting), some household farms in China have maintained their competitiveness despite their small size and fragmented land (Huang and Ding 2016a;Zhang et al 2017). Although promising in theory, market-based outsourcing of mechanisation services is constrained by market friction, high transaction costs and various institutional barriers, and therefore is only in its preliminary stages in rural China.…”

“…To overcome this constraint, small farms could fragment their production process into different stages (as in industrial production and trade) by outsourcing certain stages-for example, those requiring specialised skills such as harvesting and sowing-provided that proper institutional arrangements were in place. The findings of Yang et al (2013) and Zhang et al (2017) for the first time draw attention to another option that farms could adopt to compensate for the lack of individually owned labour and capital for production efficiency improvement: cross-regional mechanisation services from related service providers. They tested their argument using a case study of Peixian in Jiangsu province.…”

“…Although the mechanism proposed in Yang et al (2013) and Zhang et al (2017) does not solve the main problem when agricultural production is broken into stages, and does not seem to be associated only with small farms, it provides an alternative way to think about improving the productivity and profitability of small household farms. In other words, if capital (or labour) services are divisible and separable from their ownership through the market-based contract system to fit the particular size of farms (Figure 13.17), it is no longer necessary to consolidate cultivated land to enlarge farm size (to equip better capital or labour services).…”

“…Yang et al 2013;Zhang et al 2017) points out that contract 'mechanised harvesting service clusters' could change the agricultural production of small farms. As the authors argue, a lack of specialisation in labour and capital in particular stages of agricultural production restricted the productivity improvement of small farms in China.…”

“…In such a process, institutional innovation is essential to erase market failure caused by high transaction costs associated with dividing capital services and allocating them between farms. While outsourced mechanisation services currently account for only a small proportion of total agricultural capital services, a range of farmer cooperatives have begun providing access to capital services across China's provinces in recent years, reflecting the increasing market demand from small farms in Chinese agricultural production (Zhang et al 2017) and its potential for future development. Finally, a third body of literature analyses the relationship between land consolidation and contract mechanisation services.…”