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Wage growth, landholding, and mechanization in agriculture : evidence from Indonesia
 
Author:Yamauchi, Futoshi; Collection Title:Policy Research working paper ; no. WPS 6789
Country:Indonesia; Date Stored:2014/02/27
Document Date:2014/02/01Document Type:Policy Research Working Paper
SubTopics:Regional Economic Development; Rural Poverty Reduction; Crops and Crop Management Systems; Labor Policies; Rural Development Knowledge & Information SystemsLanguage:English
Region:East Asia and PacificReport Number:WPS6789
Volume No:1 of 1  

Summary: This paper uses farm panel data from Indonesia to examine dynamic patterns of land use, capital investments, and wages in agriculture. The empirical analysis shows that an increase in real wages has induced the substitution of labor by machines among relatively large farmers. Large farmers tend to increase the scale of operation by renting in more land when real wages increase. Machines and land are complementary if the scale of operation is greater than a threshold size. In contrast, such a dynamic change was not observed among relatively small holders, which implies a divergence in the movement of the production frontier between Java and off-Java regions given that the majority of small farmers are concentrated in Java.

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