Seminario CEDE - Steven Brownstone

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Agricultural mechanization plays an important role in countries’ productivity growth. Through labor markets, mechanization’s impacts extend beyond mechanizing farmers themselves. This study presents results from a randomized experiment that studies the impact of reducing farmer barriers to mechanization at the village level. By combining government farmer training infrastructure with rentals, the intervention tripled the uptake of a technology that replaced manual rice transplanting. For farmers, labor costs decreased with no change in yields or other expenses, leading to a 6% increase in profits. At the labor market level, mechanization led to a 7% decrease in days of labor demanded for transplanting, which translated to a 6% decrease in piece-rate transplanting wages. Beyond the first-order distributional impacts, the wage effects reduce the relative profitability of further mechanization. This is illustrated in a quantitative model calibrated to the experimental results. The model shows how the same reduction in the fixed cost of adopting mechanization under a shallower labor supply curve results in larger increases in productivity with more income for workers. The study shows how labor market frictions shape how mechanization impacts workers, farmers, and economies.