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Report No. 6470 Agricultural Mechanization: Issues andPolicies October 10, 1986 Agricultureand Rural Development Departmnent FOR OFFICIAL USE ONLY Document of theWorldBank This documnent has a restricted distributionand may be usedby recipients only in the performance of their officialduties.Its contents may not otherwise be disclosed without WorldBank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

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Page 1: Report No. 6470 Agricultural Mechanization: Issues and ... · PDF fileReport No. 6470 Agricultural Mechanization: Issues and Policies ... AGRICULTURAL MECHANIZATION: ISSUES AND POLICIES

Report No. 6470

Agricultural Mechanization: Issues and Policies

October 10, 1986

Agricultureand Rural Development Departmnent

FOR OFFICIAL USE ONLY

Document of the World Bank

This documnent has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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FOR OMCIAL USE ONLY

ACKNOWLEDGENKNTS

The report was prepared by Hans P. Binswanger andGraeme Donovan, with the invaluable assistance ofRaymond Fabre. Exremely helpful comments were providedby G. Edward Schuh, Vijay S. Vyas, Alan Walters,Michael Lipton, Wayne Thirsk, Alain Seznec. Thanks goto Fleurdelize Canlas, Gene Cummings, and Consuelo Tanfor tvping the many versions and to Rhonda Zaharna foreditorial assistance. The work was carried out underthe general guidance of S. Shahid Husain.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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AGRICULTURAL MECHANIZATION: ISSUES AND POLICIES

Contents

1. EXECUTIVE SUMMARY

Introduction . . . . . . ..................... lPatterns, Sequences and Recent Trends . . . . . . . . . . . . . . . 2Efficiency Effects of Mechanization . . . . . . . . . . . . . . . . 4Employment, Income Distribution and

Environmental Effects of Mechanization . . . . . * . . . . . . . 5Bringing Mechanization Policy in Line with Development Objectives . 7Lessons for the World Bank . . . . * . . . . . . . . . . * . . . . 10

2. PATTERNS, SEQUENCES AND RECENT TRENDS

Introduction . . . . . . .. . . . . . .............. lPatterns, Sequences and Recent Trends . . . . . . . . . . . . . . . 12Agricultural Intensification, Power Requirementsand the Use of the Plow . . . . . . . . . . . . . . . . . . . . 16

The Mechanization of Power-Intensive Operations . . . . . . . . . . 17The Mechanization of Control-Intensive Operations . . . . . . . . 20Is Small Farm Size An Important Constraint to Mechanization? . . . 26Tractorization in the Developing World: Trends & Determinants . . 28Land Availability . . . . . . . . . .. . . .. . . . . . . 32Recent Rural Labor and Wage Trends & Future Prospects . . . . . . . 37The Role of Labor-Scarcity and Land Abundance Reconsidered . . . . 42

3. MACHINERY INDUSTRY, INDUSTRIAL POLICY AND TECHNOLOGY TRANSFER

International Machinery Industry . . . . . . . . . . . . . . . . . 44Domestic Farm Machinery lndustry . . . . . . .. . . . ... . . . 46Technology Transfer and International Assistance . . . . . . . . . 51Transferring to Hand Tools and Animal Draft Technology . . . . . . 52

4. THE ECONOMIC EFFECTS OF MECHANIZATION

Efficiency Benefits of Mechanization . . . . . . . . . . . . . . . 56Substitution Benefits . . * .*. * * *. ... * * *.... 58How Important Are Draft Animal and Fodder Savings? . . . . . . . 59Indirect Output Expansion . . . .a. . . . . . . . . . . . . . . 60New Opportunities . . .... 0 . . .. . . . . . . . 60Direct Output Effects . . . . . . . . .. .a . . . .. .. . . 62Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

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Contents (contd.)

Page No.

Cropping Intensitv 66Timeliness 67To Summarize 68Reduction of Drudgery 68

Employment and Income Distribution 68When Technologies Are Not Mutually Exclusive 69When Technologies Are Mutually Exclusive 74Farm Size Ef'ects and Self-Employment Opportunities 74

5. BRINGING MECHANIZATION POLICY IN LINE WITH DEVELOPMENT OBJECTIVES

Effects of Machinery Subsidies 76Second-Best Considerations 77Subsidized Agricultural Credit 82Overvalued Domestic Currencies 86Import Tariffs and Duties 90Machinery Subsidies 93Tractor Prices in 1985: A Cross-Country Comparison 95Effects of Land Tenure and Labor Regulations 97Other Biases in Technology Choice 98Should Governments Discriminate Against Mechanization torurther Poverty Alleviation ani Equity Objectives? 99

To Summarize 103

6. Lessons for the bank 105

Appendix 1 108

Appendix 2 111

References 131

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Contents (contd.)

Boxes

Page No.

Box 1 Can One Use Tractors to "Modernize" ShiftingCultivation Systems in Sub-Saharan Africa? 18

Box 2 Host Mechanical Power Requirements Were Metin India's Green Revolution 21

Box 3 The Record of Failure of Public Machine Hire Stations 27

Box 4 Power Tillers or Four-Wheel Tractors? 29

Box 5 Environmental Issues in Land Clearing 34

Box 6 Rural Employment and Wage Trends in theDeveloping 'lorld 38

Box 7 Harvesting and Milling Losses 57

Box 8 General Equilibrium Effects of Adopting AlternativeTechnical Innovations in Agriculture 72

Box 9 The Impact of Subsidies for Mechanization inthe Colombian Economy 78

Box 10 Mechanization Policy in China 83

Box 11 Poor Women and tne Mechanization of Post-HarvestProcessing in Bangladesh 101

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Tables and Figures

Chapter 2: Patterns, Sequences and Recent Trends

Figure 2.1 Trends of Harvester Combines in the World, 1963-1983 23

Figure 2.2 World Tractor & Tractor Horsepower Intensities, 1960-1983 30

Figure 2.3 Changes in the Share of Agriculture in the Labor Forceand In GDP (1960-1980) 41

Table 2.1 Comparison of Agricultural Operations in Terms of Powerand Control Intensity 13

Table 2.2 Farm Intensification and Power Needs 16

Table 2.3 Sources of Area Expansion in Countries With the Fastestand Slowest Growth in Arable Land 36

Chapter 3: Machinery Industry, Industrial Policy and TechnologyTransfer

Table 3.1 Machines Manufactured (Average 1980-1982) 48

Table 3.2 Selected Bank/IDA Supported Projects with AnimalDraft Components 54

Chapter 4: The Economic Effects of Mechanization

Table 4.1 Summary of Comparisons Between Tractor-Operatedand Animal Draft Farms in Asia 63

Table 4.2 Paired Output and Input Differences BetweenTractor and Bullock Operated Farms For CasesWhere Tractor Farm Appears to Have SubstantialProductivity Advantage 64

Table 4.3 Summary of Comparisons of Animal Traction Farmswith Handhoe Farms in Sub-Saharan Africa 65

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Tables and Figures (contd.)

Chapter 5: Bringing Mechanization Policy in Line with DevelopmentObjectives

Table 5.1 Employment in Farm Machinery Industry inFour Countries (late 1970s) 81

Table 3.2 Real Interest Rates in Bank/IDA SupportedAgricultural Credit Projects (1972-1984) 85

Table 5.3 Selected Agricultural Credit Projects withMechanization Components 87

Table 5.4 Ratio of Parallel Market Exchange Rate toOfficial Exchange Rate 88

Table 5.5 Currency Realignments in Selected Developing Countries 89

Table 5.6 Tractor Prices in Selected Developing Countries (1985) 91

Table 5.7 Differential Duties on Tractors and Spare Parts (1985) 92

Table 5.8 Tractor Prices Per Horsepower (1985) 96

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4GRICULTURAL MECHANIZATION: ISSUES AND POLICIES

Chapter 1: EXECUTIVE SUMMARY

INTRODUCTION

1.1 This paper is concerned with agricultural mechanization and mecha-nization policy in developing countries. For the purposes of the paper wedefine agricultural mechanization to include:

o the process by which increased mechanical energy is applied toagriculture;

o the development, use and management of improved mechanical aidsfor land clearing, water control, crop production, materialshandling, storage and processing; and

. hand- and animal-powered implements, units powered by engines orelectrical motors, and their associated equipment.

Mechanization meets the growing power and timeliness requirements ofintensified egricultural systems. Our definition implies that these powerand timeliness requirements can be met by a wide variety of power sources,implements and equipment. Mechanization policy is governmentinterventions, both direct and indirect, which affect decisions farmers andothers make as they select power sources, the types and sizes of machines,and the implements to be used with any given power source. It also dealswith international trade in machinery and equipment, and with thedevelopment of the machine industry in developing countries.

1.2 The central economic policy question which developing countriesface regarding mechanization is not whether or not to mechanize, but how toprovide an environment which leads to the combination of power sources andmachine types which advances the countries' economic and developmentobjectives in the most cost-effective ways. These objectives includeimprovements in the balance of payments, accelerated economic growth,reduction in unemployment, poverty and malnutrition, etc. To consideraccelerating mechanization as an objective in and of itself is to confusemeans with ends. Nevertheless, this report shows that most developingcountries pursue a mix of policies which -- although often internallyinconsistent -- tend to accelerate mechanization beyond the pace which isconsistent with the policy objectives just discussed.

1.3 A central point of the paper is that general economic policiessuch as those affecting exchange rates and interest rates often have agreater effect on the pace of mechanization than do those commonlyidentified as mechanization poliries. Moreover, since the mostcost-effective mix of power sources and machine types varies in complexways with differences in agroclimatic and economic varibles,decision-making by farmers and machinery owners themselves is essential.

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Decisions made in this way will be, for the most part, privatelycost-effective. For these to be in line with economic growth objectivesthere needs to be a minimum of inconsistent policy-induced distortions. Itis thus essential that a broad perspectivebe taken in assessing policiesthat affect the mechanization process.

1.4 Debates about mechanization and mechanization policy can becomevery emotional Advocates of rapid mechanization find themselves accusedof exaggerating its direct output effects or of confusing mechanizationwith modernization or large machines and farm size with efficiency.Critics wtio raise employment issues, or who point out that the growth ofmechanizing farms may displace small farmers and tenants, are accused ofunderestimating the new opportunities mechanization might create, or ofneglecting the contribution of mechanization to industrialization. Theyare also frequently seen as condemning poor rural people to a life ofdrudgery and lack of leisure time. Advocates of small-scale 'appropriate"technology, or of animal draft, may be ridiculed for wanting to turn thewheel of history backwards and preserve a way of life whose time is longpast.

1.5 The primary aim of this report is to clarify the issues wlhichgenerate these emotions. It does so by analyzing the contribution whichmechanization makes to economic growth, and the ways in which efficiencyand equity effects of the mechanization process may be improved by removingpolicy distortions.

PATTERNS, SEQUENCES AND RECENT TRENDS

1.6 Agriculture in developing ̂ ountries is very unevenly mechanized.Certain regions of Latin America hare fairly complete mechanization,similar to the U.S., Western Europe or Japan. At the other extreme,farmers in most of Africa, or in Java, still till their land with handtools. In densely populated Asia, tractors are tending to replace draftanimals for tillage and transport, while in West Africa governments arepromoting the introduction of animal draft power into farming systems whereit did not exist before. Why do wf observe such widely different levels ofmechanization, and why are some operations mechanized but not others? Theanswers emerge from consideration of the important technological,agroclimatological and economic factors.

1.7 In analyzing patterns of mechanization the emphasis should be onthe particular agricultural operations, rather than on power sources whereit is usuallv placed. We group agricultural operations into twocategories:

o power-intensive - those operations which use relatively largeamounts of energy, which include transport, milling, grinding,pumping, land preparation and threshing; and

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o control-intensive - those operations which need relatively moreinput of human judgement, which include seeding, weeding, pestcontrol, winnowing, and harvest of more fragile crops such asfruits.

Using this framework, harvesting of grain crops and secondary tillage fallinto an area intermediate in power and control-intensity. The paper showsthat there are strong economic reasons why the more tedious, power-intensive operations tend to be mechanized first.

1.8 With increased population there tends to be pressure forintensification of agriculture, which is always associated with greaterrequirements for labor and/or power. Sometimes the demand for additionalpower (mechanical energy) rises faster than the agricultural labor force iscapable of providing. There are many different ways in which the extrapower can be made available. The fundamental determinants of the types andspeed of mechanization are the demand for agricultural output, the supplyof labor, wage levels, availability and cost of capital, and the costs ofmachine operaticns themselves. These together determine the mix of powersources which will be used to satisfy the increased labor and power needs.Because each poier source tends to be used for the task(s) for which it hasgreatest comparative advantage, various types of mechanization oftenoperate side by side. In some cases, particular technical conditions --such as special soil types (steepness, erosion susceptibility) orprevalence of forest fallow farming systems -- change the costs of machineoperations enough so that they are not adopted where they might otherwisebe expected. On the other hand, policy distortions may speed upmechanization beyond the pace at which it would grow in the absence ofdistortions.

1.9 Transport, and power-intensive pumping and processing operations(especially threshing and milling), are usually mechanized long beforewages rise to high levels. The plow (animal-drawn at first) is adoptedonly after agricultural intensification has proceeded beyond the forestfallow (slash and burn) system. The prevalence of the fallow system andthe persistence of the hand-hoe in many parts of Africa are partiallyexplained by the high costs of destumping needed before the plow can beused satisfactorily. Until costs of production using the plow are lowerthan those with shifting cultivation and hand-hoe, the latter prevails,even against attempts to speed up the transition process by introducingtractors. Once the transition has occurred, regional and local soilfactors have an important influence on how quickly plows are adopted, onwhat type of tillage implements are used, and on whether deep tillage leadsto yield gains.

1.10 The higher the control-intensity of the operation, the moreexpensive the machine required, and the higher must labor costs be towarrant developing and using a machine. Seedi.ig tends to be mechanizedbefore harvesting because mechanical seeding cam lead to better yields androw planting reduces weeding costs. Mechanization of harvest (e.g. usingharvesting combines) is rarely profitable on peasant farms in low-wagecountries, because cost-effectiveness of harvesting machines dependsdirectly on labor costs.

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1.11 Three main types of tractorization have taken place in thedeveloping world:

o power tillers and small four-wheel tractors for land preparationof rice, and transport, in cultivated wetland areas of Asia;

o four-wheel tracto.,s for land preparation and transport in someupland (rainfed) areas of Asia, Africa and Latin America; and

o four-wheel tractors on large scale farms in Latin America and inhighly confined areas of East Africa used tor a broad array ofoperations.

A statistical analysis of the main factors influencing these tractor trendssuggests that agricultural intensification (often associated with expansionof area irrigated), increased capital availability, and improved roads havebeen particularly important. Rising wages have been less important as afactor promoting tractors in the developing countries than in the developedworld. It has also become clear that the economies of size which used tofavor larger machines are not as marked today because of engineeringinnovations and the possibilities for rental. markets. Therefo,e, bothsmaller and larger farms can usually participate in mechanization where itis profitable.

1.12 Projections of agricultural labor forces in developing countries,based on demographic assumptions, show the continued pressure under whichagricultural labor markets will be operating in the future. This impliesthat real rural wages may well decline in a number of developing countries,especially in some of those which are among the poorest today.Mechanization policy will have to take account of these trends.

EFFICIENCY EFFECTS OF MECHANIZATION

1.13 The most obvious effects which new machines have on efficiencyare their substitution benefits, i.e. the cost savings when machinesreplace human labor, draft animals or older machines. These cost savingscomprise mainly wages, but also include the fodder costs of draft animals(some of the wages saved are for labor involved in maintaining and drivingdraft animals). Care needs to be taken in assessing savings in foddercosts. While it is true that individual farmers changinig to machines canuse the land once used for fodder production to grow other crops for sale,they also need these additional sales to pay for the running costs ofmachines. Whether there is a net gain depends on individualcircumstances. The same consideration applies at the national level.

1.14 If mechanization reduces production costs enough, farmers willrespond to the greater profitability of the mechanized enterprise by tryingto expand production. This indirect expansion of aggregate production willtake place unless it is conatrained by a very Inelastic market demand forthe output, or by high costs of expansion such as those associated with

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developing new land. Limitation in market demand may cause output pricesand sales revenue to fall so much with the expansion of production as tooffset the extra profitability from mechanizing. (To the individualfarmer, however, mechanization is still more profitable than notmechanizing). In this case, consumers get all the benefits through lowerprices. Where high land development costs limit the expansion ofproduction, the benefits from cost savings will be capitalized into higherland values or rents.

1.15 When enterprises are technically feasible with labor or animaldraft but are prohibitively costly, mechanization may be cheaper and thusmay open new opportunities in production. Examples of new opportunitiesare irrigation by pumps from underground aquifers, conversion of livestockgrazing land to crops, and lowering of transport costs (through carts,tractors, trucks, buses and cars) that have helped convert subsistenceagriculture to market-oriented production.

1.16 More uncertain are the direct output effects often claimed formechanization, especially increased yields from better or more timelytillage. While research station results show that better tillage canresult in increased yields, evidence from many farm surveys suggests thatfarmers in genieral do not achieve better tillage when they adopt machines.Furthermore, when capital is scarce, farmers tend to achieve capacity useof their machines by spreading them thinly over large areas rather thanconcentrating them to improve timeliness. In practice, mechanization ofharvesting and processing has resulted in greater as well as smaller croplosges -- the record is mixed. Greater cropping intensity requires moreinput of imechanical energy that must be applied with greater timeliness,especially when double and triple cropping will be practiced. But greatermechanical energy and more timely operations can be provided in many ways,and not just by a specific machine. Wi.h the exception of mechanicalseeders which do increase yields of crops and save seeds, it is ratherdoubtful in practice, that any one specific machine can claim direct yield,timeliness and cropping intensity effects. Where such effects are clearlyassociated with mechanization, they can usually be more justly attributedto other changes, such as irrigation.

EMPLOYMENT, INCOME DISTRIBUJTION AN) ENVIRONMFNTALEFFECT OF MECHANIZATION

1.17 While wages are production costs to the farmer, they are incometo the worker. In a dynamic economy, mechanization is only one changewhich affects employment and income distribution, so it is important toconsider as many as possible of the effects before reaching a finaljudgment about overall consequences. Unless they generate newopportunities, mechanical technologies generally reduce labor needed perunit of output. Hnwever, the consequences for labor welfare are difficultto predict. What happens to overall labor demand in agriculture depends onthe extent of indirect output expansion. This in turn depends on theextent to which agricultural prices decline when output expands, i.e. on

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the price elasticity of demand for agricultural output, and on the costs ofexpanding agricultural areas. Thus, depending on the circumstances,mechanization may either reduce overall agricultural demand for labor(reduce the agricultural wage bill) or increase it. Either way, those whodraw most of their.income from wages will be most affected. Generally thepoorest groups are in this category, although sometimes they also draw someincome from land or other capital assets.

1.18 When output prices fall more in percentage terms than the expan-sion in production, the indirect output effect will be correspondinglysmall and mechanization will reduce the overall agricultural wage bill. Inthis case, however, the decline in output prices that occurs will to someextent mitigate the income reduction for agricultural laborers if theparticular products whose prices fall are important among their purchases.This will usually be the case with staple foods.

1.19 Even where the agricultural wage bill declines (or rises lessthan it would have without cost-reducing mechanization), the economyusually experiences a gain in income. The spending of this income willgenerate more employment elsewhere in the economy. If enough employment isgenerated in the non-agricultural sector it may more than make up for thelosses suffered by workers in agriculture. These positive long-run effectswill not arise, however, if the productivity of mechanlzation does notexceed that of capital in other industries, or If labor market rigiditiesin other industries prevent the absorption of labor once their outputexpands.

1.20 While the effect of mechanizationnbn absolute levels of workerwelfare is difficult to predict, the relative income distribution effectsare clearer. Mechanization will be associated with faster growth ofIncomes of landowners or those who have capital than of those who havelabor as their primary source of income. In addition, more than otherinnovations, mechanical ones favor larger farns. They also tend to lead toincreasing farm size.

1.21 The main environmental issue associated with mechanization isthat of mechanical land clearing. The issue is not whether to cleartropical forests or what effect deforestation will have on geneticdiversity and other environmental factors. These concerns ariseirrespective of the method used to clear land. Instead, the issue formechanization policy is what technique to us8 once it is established thatland must be cleared. Evidence suggests that clearing it by hand, or withwinches, is typically less damaging to soils than clearing it withbulldozers. It is technically feasible to avoid soil damage by usingproper implements, and by operating the bulldozers carefully. In practicehowever, proper implements and care are often lacking.

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BRINGING MECHANIZATION POLICY IN LINE WITH DEVELOPMENT OBJECTIVES

1.22 Most developing countries pursue a variety of policies whichencourage high capital-labor ratios and accelerate agriculturalmechanization. Such distortions can be justified if they promote theeconomic and social objectives of these countries in cost-effective ways,such as improving their balance of payments position, accelerating economicgrowth, reducing unemployment, poverty and malnutrition, or improving thedistribution of incomes. However, mechanization subsidies are almostalways inconsistent with these goals.

1.23 While the overall productivity and equity impacts ofmechanization itself are difficult to predict, the effects cf distortionsare easier to see: any distortions in favor of agricultural mechanizationimply the loss of alternative investments which are equally or moreproductive and do not reduce labor demand as much as the subsidizedmechanical input. A net subsidy therefore will reduce economic efficiency,employment, real wages and/or the real wage bill below what they wouldhave been in the absence of the subsidy. It will usually increase netimports of fuels and machines and will adversely affect small farmersrelative to large owners. The harmful effects are not offset by favorablegeneral equilibrium effects elsewhere and their employment impact extendsbeyond the agricultural sector. Furthermore, these conclusions apply tomiddle-income countries with rising wages as well as to low-incomecountries with stagnant or falling wages.

1.24 An alternative way of justifying such distortions is to show thatthey offset -- in a cost-effective way -- the harmful effects of otherdistortions in the economy which cannot be removed. Although such second-best considerations are often advanced, subsidizing mechanization istypically an inferior way of offsetting the impact of other distortions.For example, where urban biased price policies discriminate againstagriculture, a subsidy on fertilizers would have more powerful effects onrestoring output levels than would a subsidy onl mechanization. And thefertilizer subsidy does not further aggravate pressures for urbanizationnor does it have income distributions problems that are as serious.

1.25 One of the most common forms of mechanization subsidy is creditavailable to farmers at subsidized interest rates. In fact, a significantproportion of credit for agricultural mechanization is at interest rateswhich are not only subsidized but also are very low, or even negative, inreal terms. This distortion is made sharper when such credit is rationedbecause it tends to end up ln the hands of larger farmers, who may alreadybe more than proportionately advantaged by agriculttural mechanization.Between FY72 and FY85 the World Bank moved about one-quarter of its commit-ments for agriculture through credit projects. Some 60 percent of theBank,IIDA funds for agricultural credit were on-lent at negative rates ofinterest. At least one-third of the farm machinery investments in allBank-supported projects of the past decade have been made with credit whoseinterest rates were negative in real terms. That other sectors also

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receive subsidized interest rates does not justify a diEtortion in favor ofhigher capital-labor ratios in agriculture because such a policy wouldfurther reduce economy-wide employment and wage levels. The Bank has triedpersistently to raise interest rates in the projects it has supported, buthas been successful in doing so only in small increments.

1.26 A significant proportion of the imported farm machinery purchasedwith these credits was further subsidized through the other major source ofdistortions: overvalued domestic currencies. This overvaluation has thegeneral effect of reducing incentives to invest in agriculture, but it alsodistorts the choice of technologies in favor of those which use tradableinputs, including imported machines. Depending on the rationing mechanismfor foreign exchange used by governments, the subsidies on it will benefitthe lucky recipient farmers (again usually the larger and better off ones),or may be shared with importers where there is a black market markup onImported machines. Overvalued domestic currencies result in widelydifferent machinery prices in various countries and reduce the ability ofsome countries to exploit competition among international machinerysuppliers.

1.27 Imported agricultuiral machinerv is often treated more favorablythan other kinds of equipment and induistrial commodities through importtariffs and duties. In some cases, this differential treatment is a policyinducement for using tractors instead of trucks for transport purposes.One of the more damaging uses of dlifferential tariffs is the generally muchhigher duties on implements and spare parts than on tractors. Thisadversely affects the range of tractor implements from which farmers canchoose, discriminates against animal draft implements and hand tools, andabove all, contributes to failure to maintain imported tractors in goodrunning condition. Some countries have used higher tariffs on wholemachines or spare parts to encourage growth of domestic industries. Suchpolicies should be used with great cauition becauise of the ever presentdanger of freezing in place ineffirient, high-cost prodtiction.

1.28 The implicit subsidization of machinery through overvaluedcurrency and 'easy' credit are much more common than explicit, directsubsidies on machinery. The latter, however, do exist in some countries.One striking thing about their occurrence is their apparent redundancy --they either add to subsidies through other means that are already far moresubstantial, or they have little effect in stimulating the adoption ofmachines because of other overriding problems in domestic manufactrre.Where subsidies on farm machinery through income tax write-offs areparticularly large, the distortions tend to he capitalized into landvalues, and adversely affect the poor who rely on employmenc. Subsidies onthe operating costs of machines (e.g. fuel or electricity) are alsodistortions favoring mechanized technologies over other alternatives, andin general are not second-best policies.

1.29 There is not much evidence for the existence of a bias towardsmechanization inherent in minimum wage laws or strong unions which hold uplabor costs artificially. Many such arrangemnents are ineffectivelyimplemented in smallholder areas dominated by familv farms. However, by

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creating distortions in urban labor markets such policies can impede theabsorption of labor released from agriculture as a consequience ofmechanization. There is some evidence that land laws and tenancyregulations can influence the nature of mechanization, allowing for a moreorderly outflux of labor from agriculture, slowing down eviction oftenants, preventing farm sizes from growing too rapidly, and allowingadjustment time for groups adversely affected. Effective implementation ofsuch arrangements is essential, of course, if they are to have any meaning.

1.30 In instances where the productivity gains from introducingmachines would be small, but labor displacement particularly large, theremay be a second-best case for discriminating against mechanization onpoverty alleviation and equity grounds. If the machine does not reducecosts of production substantially, rather than adopting a welfare policy toassist affected workers directly, imposing a machine tax can protectworkers at a lower cost. Direct welfare policies are usually prohibitivelycostly because it is almost impossible to identify the real losers.Therefore, the machine tax may be the only way in which potential loserscan be compensated. The decision to implement a tax is a value judgementwhich must be based on the government's commitment to the welfare of poorworkers. When governments decide to assist workers by slowing downmachinery adoption, two points must he kept in mind. First, it isinappropriate to ban machines altogether because vital information is lostand the flexibility to respond to a changing situation is reduced. Second,imposing taxes on machine, which reduce production costs very substantiallyis unlikely to be a cost effective welfare measure. Machine taxes are acost-effective welfare measure only where the forgone reduction inproduction cost is not very large.

1.31 With respect to international trade in machinery, the main policyissues (other than overvalued currencies discussed above) relate to spareparts supply, tied bilateral aid_barter and tendering. All can contributeto 1*efficient use of imported equipment if handled improperly. Adequateprovision of spare parts is critical for keeping machinery operatingproduccively. To ensure this, governments need to allocate enough foreignexchange for their purchase, avoid tariff discrimination against sparepar.s, and possibly put some broad limits on a proliferation of brands ofequipment. Ensuring that these measures are in place is better thanrequiring the importation of spare parts at an arbitrary 15 percent to 20percent by value, although the latter is better than no provision. Tiedbi-lateral aid and barter, if they bring in machines for which gooddistribution and servicing arrangements are not in place, mav not be in acountry's best interest, in spite of discounted purchase price. Fortendering to work best for a country, very careful specification is needed,the ability of the supplier to support the product should be ascertained,and the pricing analysis should cover selected parts as well as the initialmachine. The Bank continues to modify its hidding procedures for bothinternational and domestic procurement to address these problems.

1.32 When governments are considering policies for supporting domesticmachinery industry, at the top of the list should he providing basicinfrastructure -- in communications, transportation and electric power.

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Public sector involvement in manufacturing should be planned only as aninterim measure. Public sector machinery hire schemes have a particularlydismal record and are not recommended (Box 3 in Chapter 2). Price controlsand profit controls on manufacturing are unnecessary and may becounter-productive. Standardization of components can lower unit costs ofmanufacture and aid maintenance, but it should be introduced from thebeginning rathez than later. Domestic content legislation is invariablyoverambitious, and should not be forced by stiff tariffs or physicalrestrictions on imports. The same case can be made against subsidies tomachinery industry as has already been made against other machinerysubsidies. The process of adaptation and innovation should be fostered incommerclal firms. There may be a case for public support of training ofmachinery operators and servicing personnel.

1.33 Promoting the manufacture of improved hand tools and animal-drawnimplements has many elements similar to suD crt for more complex machinery.Special attention may be needed to the supply of raw materials. Extensionefforts and specific projects in support of animal draft itself have beensuccessful in regions of Africa where rising population, Increasingagricultural intensification and improved market access have set the stagefor its introduction. Such projects provide benefits in terms of manureand should recognize the importance of complementary meat production.Projects should provide training and support for blacksmiths, wood andleather workers, and special attention to provisions for animal health andfeeding. They should be combined with improved access to credit for draftanimals and equipment. Draft animals purchased on credit should beinsured.

LESSONS FOR THE BANK

1.34 In general, Bank experience has shown that pursuit of growth andpoverty alleviation objectives via project interventions is not feasiblewhen government policies are inconsistent with these objectives. Thebeneficial effects of a rural development project emphasizing small farmersand/or a poor region can easily be offset if distorted mechanizationpolicies encourage capital-intensive and large scale farm units elsewherein the economy. The Bank is already emphasizing the reduction of implicitdistortions affecting mechanization as part of its structural adjustmentand agricultural sector lending programs. Such loans tend to focus onbringing exchange rates and interest rates into line with marketconditions. Similarly, reducing the biases against agriculture in outputpricing tends to provide improved incentives for all agriculturalinvestments, including mechanization.

1.35 In past prolects which have included substantial mechanizationcomponents the bank has also persistently tried to raise interest rates,andreduce inconsistencies in the import policies of machines, spare partsand implements. Nevertheless, many of the Bank's operations have resultedin Imports of machinery at overvalued exchange rates and subsidized

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interest rates and thus have been inconsistent with both the equity andefficiency objectives of the Bank. Every project with agriculturalmechanization as a significant component should be viewed as a criticalopportunity to help create a policy environment less at odds with acountry's objectives and trends in resource endowments.

1.36 The scope for direct project intervention to promotemechanization is more limited than in other areAs of agriculturaldevelopment. An exception is the continued extension and project supportrequired for animal traction in those selected Sub-Saharan Africaenvironments which are ready to shift from hand-hoes to animal drawnimplements. Other projects in agricultural credit, research, and extensionprovide opportunities to eliminate or reduce biases against animal draft.Support to agricultural research must recognize the limited role played bypublic institutions in adapting and generating mechanical innovations.Sich research is better fostered in the private sector.

1.37 Technical assistance focusing on the domestic machinery industryis best based on knowledge of existing incentives and/or impediments whichaffect the industry. The first task is to remove b'Lases againstsmall-scale firms in the allocation of foreign exchange and high qualityraw materials. Specffic technical assistance can be initiated where thereare clear deficiencies in the support of training in mechanical skills, inthe capabilities of the patent office, or in the machinery testingcapability of the research system. Finally, a review of mechanizationpolicy provides an opportunity to strengthen the domestic capacity forevaluating these policies.

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Chapter 2: PATTERNS, SEQUENCES AND RECENT TRENDS

INTRODUCTION

2.1 The mechanization of farming in developing countries has beenvery uneven. Some regions of Latin America have mechanized many farmoperations, a pattern similar to those in the U.S., Japan or WesternEurope. At the other extreme, farmers in many parts of Africa, Java and inhilly regions elsewhere still till their fields with hand tools, althoughtillage by animal draft has been common in many part- of the world forthousands of years. Nevertheless, the same farm families who till theirfields by hand often have their grain processed in mechanical mills, orsent to market in motorized vehicles. In many parts of densely populatedSouth and South East Asia, draft animals are Increasingly replaced bytractors for primary tillage and transport, while a number of West Africangovernments actively promote the introduction of animal draft power intofarming systems where it did not exist before.

2.2 What accounts for these different levels of mechanization acrossenvironments? And what accounts for the selective use by many farmers ofmechanized techniques for some operations but not for others? These twoquestions are pursued in this chapter, which will review and explainhistorical trends and current patterns in terms of technological,agroclimatological and economic factors.

PATTFRNS, SEQUENCES AND RECENT TRENDS

2.3 Most discussions of mechanization focus excessively on the cho4ceof power sources -- labor, animals, engines and tractors -- rather than onthe operations which are done by these sources. Central to theunderstanding of recent mechanization patterns throughout the world is thedistinction between power- or energy-intensive operations and operationswhich require primarily the control functions of the human mind orjudgment. Operations such as land preparation, transport, milling,grinding and threshing are power-intensive, while weeding, pest control,sifting, winnowing and cotton harvesting are examples of control-intensiveoperations. Harvesting of grain crops and secondary tillage fall somewherebetween these two. Mechanization operations may have either mobile orstationary power sources (see Table 2.1).

2.4 When farmers turn to new or improved power sources, theyselectively use them for the tedious power-intensive operations first.This is hecause the large quantity of labor or draft animals which can besaved provide a strong tncentive to mechianize such operations even whenlabor has a low opportunity cost or fodder Is ahundant. Many of these

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Table 2.1: Comparison of Agricultural Operations inTerms of Power and Control Intensity

Low Control Intermediate High ControlIntensity/ High Power and Control Intensity/ LowPower Intensity Intensity Power Intensity

Stationary Grinding, milling, SiftingOperations: crushing Winnowing

Water lifting

Threshing, woodcutting

Mobile Operations: Transport Harvesting root Weedingcrops Harvesting

Harvesting grain tree crops,crops fruits,

vegetables

Primary tillage Secondary tillage Seedingaad interculture

Usual Sequence ofAdoption With:

Animals First Second ThirdMotors First Second Third

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operations can also be performed by relatively simple and low-coststationary machines such as mills, grinders or pumps.

2.5 Comparable international data are very limited for engines andstationary machines. An analysis of situations where information isavailable, however (e.g. Mexico, India and China - Appendix 2, Tables 3, 4and 6) reveals that mechanization with stationary machines advances morerapidly than that with tractors, with a heavy emphasis on power-intensiveoperations. Without any policy assistance, small grain mills have sweptthrough the entire developing world, including many parts of Sub-SaharanAfrica. Where intensive irrigation is practiced, pumps have replaced hand-or animal-powered techniques for water lifting in all but the poorestenvironments. Stationary threshers for wheat and rice have been adopted inmany double-cropping regions which have benefitted from Green Revolutiontechnologies.

2.6 In most developing countries, tractors are primarily used fortillage and transport, with the control-intensive operations continuing tobe performed by draft animals or hand labor. Mechanization of transportvia small and large trucks -- often on a hire basis -- has also spreadwidely. For example, many Sub-Saharan African farmers who still till theirland by hand use mills to grind their grain and motor vehicles to ship itto the market. However, more complete mechanization of the kind found indeveloped countries and involving the use of tractors or self-propeliedmachines for all but the most delicate field or animal husbandryoperations, is sharply confined. It occurs primarily in middle-incomecountries such as Yugoslavia, Chile or Brazil. Even there, it is usuallyconfined to advanced regions and/or large-scale farms and the small-scalesector is characterized by patterns of mechanization found In substantiallypoorer countries.

AGRICULTURAL INTENSIFICATION, POWER REQUIREMENTS AND THE USE OF THE PLOW

2.7 Where draft animals are already in use, the decision of whetherto replace them in a specific operation, or in several operations by atractot and/or stationary machines, is made on cost considerations. Thereare large areas of Sub-Saharan Africa and Latin America, however, and somevery limited areas in Asia, where human labor is still the onlv powersource used in field operations. Some areas where hand-hoe agriculturepersists are hilly or mountainous and have high population densities. Inthese areas, the use of the plow is precluded by the steepnesa of theterrain. The vast majority of areas, however, have low populationdensities and their small field size or the terrain itself, pose nobarriers to the use of the plow4. In large parts of Sub-Saharan Africa theTse-Ts_ fly, which transmits the cattle disease, trypanasomiasis, presentsa tecnnical barrier to the use of oxen, but not tractors. Thereforetrypanasomiasis in, and of itself, is no technical barrier to the plow.The absence of the plow must have a different explanation.

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2.8 These regions typically practice some form of shiftingcultivation, a form of agriculture which was prevalent many centuries agoin large parts of Europe and Asia. The question is why an apparentlylabor-saving technology, the plow, is not used in shifting cultivationsysems. The answer is because these systems can -- with minimal landpreparation -- produce agricultural output with lower labor requirementsper unit of output than would be the case if the plow were introduced.

2.9 The forest fallow system is associated with very sparsepopulation densities. A plot of forest land is cleared and cultivated forone or two years and then is allowed to lie fallow for 20-25 years which isusually long enough to allow forest regrowth. When population growthforces a reduction in the period of fallow, the forest degenerates to bushsavannah where a plot of land is cultivated for two to six years, followedby six to ten years of fallow. Eventually the fallow period becomes tooshort for anything but grass growth. At this stage, the habitat of theTse-Tse fly, a shade-loving insect, is sharply reduced and a technicalbarrier to the use of cattle for draft tends to disappear. The transitionto grass fallow occurs at population densities of 16-64 persons per squarekilometer (Boserup 1981, and Ruthenberg 1980). When population densityincreases further, fallow is entirely eliminated and annual ormulti-cropping systems emerge.

2.10 When cropping intensity rises, the total labor input per hectareon a given crop rises. For example, the movement from forest fallow toannual cultivation is associated with an increase ia total labor inputper hectare of rice from 770 hours in Liberia to 3,300 hours in Cameroon.The increase in labor input occurs because (a) certain tasks (for example,land preparation and weeding) have to be performed more often and morethoroughly; and (b) totally new operations have to be performed (e.g.manuring, irrigation, etc.). Table 2.2 shows how the operations performedincrease with the intensification of the farming system.

2.11 The evoluLion from hand-hoes to animal drawn plows occurs whenthe resulting labor-saving benefits exceed the variable and fixed costs ofswitching to new tools. The overhead labor costs of animal draft includecosts of training animals, deetumping and levelling fields, and feeding andmaintaining the animals on a year-round basis. In a particular locationthe speed of adopting the plow will be influenced the value of jointproducts of animals, such as manure, and meat and hides.

2.12 While the use of the plow becomes very common at the annualcultivation stage, soil factors and the terrain also determine whether theplow is adopted, and where it is adopted first. For example, in much ofthe sandy soils areas of the Sudan-Sahel the plow has not been adoptedbecause the sands do not benefit much from tillage and because farmers wishto sow immdiately into untilled plots as soon as the very short plantingseason starts. Mechanized farming in these environments and otherenvironments where soils are not very heavy may ultimately involvepractices of land preparation which do not involve the plow at all. Tncontrast, the clayly bottomlands on which much cultivation takes place inthe dry areas of Botswana cannot be used for crop production witlhout

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Table 2.2: Farm Intensification and Power Needs

Mechanical Operations Forest Fallow Annual Cropping Multi-Cropping

Land Preparation None Once Twice or more

Fertilization and None Manure & chemical Manure, green manuresManuring fertilizer compost, silt

chemical fertilizer

Weeding Minimal Intensive once Tntensive twiceor more

Harvest, andPostharvestOperations Once Once 'Twice or more

(marked labor peaks)

Irrigation None SometiImes Intensive

Overhead Land andIrrigation Only clearingInvestments by fire Stubstantial Very large

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tillage. Farmers there adopted animal drawn plows almost immediately aftertheir first contact with Europeans. More generally, the heavier the soil,the more rapid the adoption of the plow, even within a given village.Terrain and plot stze also have an effect on the adoption of the plows.For instance, highland areas in Kenya, Rwanda and Burundi, and many areasof volcanic soil in Java are densely populated and small plots of steepland are intensively cultivated without the use of the plow. Under theseconditions, the labor costs with hand-hoes are lower than those withplows. Soil factors also determine the type of tillage implement used.These can range from hoes and ridges on lighter soils to heavy steel plowspulled by several pairs of oxen or by tractors. Chisel plows and otherdeep plowing equipment provide yield benefits on some specific soil types.

2.13 Our observations about the tenacity of hand-hoe agriculture inareas of low population density can be summarized as follows:

o At the forest and bush fallow stages the high costs of destumpingand low labor requirements of crop growing make it uneconomic tointroduce the plow.

o Annual cultivation requires much larger labor inputs per unit ofoutput than shifting cultivation. Once annual cultivationbecomes a necessity the plow is the primary instrument used toprevent labor requirements for cultivation and weeding fromrising to prohibitive levels.

o Mechanization per se cannot accelerate by much the evolution offarming systems to the stage where the plow becomes profitable(Box 1). The driving forces instead are population and laborforce growth, and better access to markets at remunerativeprices.

o The relatively land-abundant regionis of the world which stilluse shifting cultivation do not face a unique problem. Europeand much of Asia had to experience the same evolution. The factthat it took place so long ago implies that developed countryanalysts and technicians typically have a hard time understandingthe efficiency of shifting cultivation systems, and therequirements for modernizing them.

THE MECHANIZATION OF POWER-INTENSIVE OPERATIONS

2.14 (a) Transport: Pack Animals - Animal Drawn Carts - MotorVehicles. In subsistence farming systems under shifting cultivation,transport requirements are minimal and confined to transporting harvests,firewood and water to the homestead. The intensification of farmingsystems and the opening of market opportunities greatly increases transportdemands: distance increases to plots, to firewood and sometimes to water;fodder is often collected, brought to the homestead and fed to animals in

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Box 1: Can One llse Tractors to "Modernize" Shifting CultivationSvstems inSub-Saharan Africa?

The low population density of Sub-Saharan Africa has often seducedcolonial as well as independent African governments into schemes for rapidtractorization, one of which was the ill-fated Tanzania groundnut scheme.The common assumption was that, once land was cleared and tractors wereprovided to shifting cultivators, farmers would then adopt a permanentsystem of cultivation. Tractors were used rather than oxen because theTse-Tse fly, which spreads the cattle disease trypanasomiasis, was viewedas the main constraint for small farmers adopting animal draft. Aconsistent record of failure shows that these common assumptions are false.

A review of 30 projects between 1945 and 1977 that attempted to speedup the process of tractorization revealed that 20 of them failed to achievetheir objective and that no tractors can be found in the project area today(Pingali et al., 1986). Of the failed projects, 14 were attempts at adirect transition from hand-hoes to tractors. If the Tse-Tse fly had beenthe main constraint, the tractor projects should have succeeded. Instead,as discussed in the text, farmers resisted the permanent system ofcultivation because, from their perspective, the production costs of usingshifting cultivation and the hand-hoe are lower than those of using atractor or animal-drawn plow.

Areas that have sustained the transition to tractors are regions inwhlch animal draft power was already well-established, lowland areas usedfor rice cultivation, or grassy savanna zones in parts of semi-aridAfrica. In the first case, the farmer must choose the most cost-effectivecombination of hand labor, animal draft and tractors. His choice isinfltuenced by the relative costs of labor and capital, the costs of areaexpansion, the potential capacity utilization, maintenance costs and fodderavailabi litv.

In valley bottom lands, where irrigated or flooded rlce is cultivated,

or in the grassy savanna areas, plows can be used without incurring highdestumping costs since the natural vegetation is primarily a grass cover.Animal-drawn plows and tractors have been sustainable under theseconditions even where population densities are low. In these areas, case-by-case analysis is required co determine what is most cost-effective to

use: animals or tractors, or both.

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stalls; manures have to be transported to fields; marketed surpluses haveto be transported to the market; and purchased inputs move in the reversedirection.

2.15 Animals were used as pack animals perhaps earlier than to pullthe plow. Yet headloading was the main means of transport in the humidtropics of Africa well into the 2OLh century because trypanasomiasisprevented the use of animals. Animal-drawn carts replaced pack animalswhere transport volumes increased substantially and where either a flatterrain or road construction were conducive to their use. Today, animalporterage is confined to regions with difficult terrain. The expansion ofrural road networks has led to bicycles, tractors, trucks and busesbecoming major means of transport in all developing countries, even insystems which never have used animal draft. This form of mechanization Isvirtually never reflected in official data. Where draft animals andmotorized transport exist side by side, as in South Asia, the same farmersoften use animals for field operations and for transport on the farm, whileusing -- often on a rental basis -- tractors, trucks or buses for farm tomarket transport.

2.16 (b) Milling, Grinding, Chopping, Crushing. Threshing and WaterLifting. These power-intensive operations are perhaps the most tiresomeand tedious in agriculture, with virtually no challenge for the humanmind. It is therefore not surprising that human ingenuity has beendirected since antiquity to alleviating this type of drudgery viamechanization.

2.17 Mechanical threshing became widespread in the United States andBritain as early as 1830. By 1850 virtually all grain in the l].S. wasthreshed by large mechanical threshers, which went from farm to farm duringthe winter months. Rental markets were extensive. By 1852 the number ofthreshing machines in France had already reached nearly one-third of itspeak 1929 level, long before the introduction of tractors. Today'sdeveloping countries appear to follow similar patterns. Where the GreenRevolution of the 1960s and 70s raised wages and increased harvests throughdouble-cropping systems (as in the Indian Punjab, Philippines, centralThailand and China), small threshers were rapidly adopted once efficientdesigns were available. In China the number of power driven threshersexceeded the number of all tractors at least until 1979 (Appendix 2,Table 3). As with earlier American and European experience, mills andthr-shers are usually rented.

2.18 In South Asia animals have long driven Persian wheels, sugarcanecrushers, and oil crushers. Animals used in these operations areincreasingly being replaced by diesel and electric engines. In India in1977 the number of pumps was about 17 times that of (mostly four-wheel)tractors (Appendix 2, Table 4). By 1981, stationary engines stilloutnumbered tractors by a similar ratio, though both had doubled theirnumbers (Singh et al. 1984). In 1983 in China *he number of engines andpumps for irrigation and drainage etill exceed the combined total of two-and four-wheel tractors by a factor of nearly 3 (Appendix 2, Table 3). hnall of Asia mechanical rice milling for large trade quantities had alre^dy

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been introduced in the late 19th century, usually based on steam and lateron internal combustion engines. Smaller rice mills have swept across Asiasince the 1950s; it is difficult to find villages where rice is stillpounded by hand. Thus mechanical milling is even more widespread thanmechanical threshing.

2.19 A recent World Bank study of Sub-Saharan Africa has shown thateven where the plow is not yet in use, the wheel and motor power havepenetrated deeply. Of 7 locations studied which do not yet use the plow,lorry and bus transport are used in 4, bicycles are commonly used foron-farm and off-farm transport in 6 locations, and grain mills areavailable in 5 locations (Pingali et al. 1986). This evidence suggeststhat it is not the absence of mechanical skills which account for theabsence of the plow. We have argued in Section 2.3 that farming systemsconstraints account for this absence.

2.20 The central point about both transport and the power-intensivepumping and processing operations is that their mechanization appears to beprofitable long before wages rise to high levels. This poins is perhapsbest illustrated by the experience of Japan (Appendix 2, Table 1). In1960, there were slightly more than half a million power tillers and smallfour-wheel tractors in Japan, a number which roqsz to over 4 million in the20 years following. But there was a combiind total of over 7 millionstationary motors, pumps, threshers and rice hullers in 1960, i.e., thenumber of stationary machines was already nearly twice as large its thenumber of tractors of any type twenty years later. The sequence In whichoperations were mechanized In India's green revolution is diiscussed inBox 2.

THE MECHANIZATION OF (;ONTRP,L,-INTENSII'E OPERAT IONS

2.21 Harvesting. Without machinery, harvesting uses a lot of labor.While harvesting is control-intenslve for most cl'ops harvesting of rootcrops probably needs the most power, alLhough it st[ll requires significantcontrol. At the other extreme, cotton, fruit, and vegetables requireintensive control but not so much power: in the case of high qualityapples, the threat of damage is so large that their harvesting has stillnot been successfully mechanized.

2.22 Appendix 2, Table 2 shows that in the T7.S., modern integratedharvesting machines for small grains, corn, straw and forage reached theirpeak numbers some time between 1960 and 1970 and have been declining sincethen along with the number of farms. However, the size of these machinescontinues to increase. Comparable internatiora. data are available onlyfor harvest combines (Appendix 2, Table 8). Their evolution for the majorregions of the world is traced in Figure 2.1. it shows that the density ofthese machines is much higher in Europe than in North America, where higheryields require more capacity per hectare and bower farm sizes prevent theuse of very large machines, than in the U.S. In Eurupe the growth of

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Box 2: How Mechanical Power Requirements Were Met in India'sGreen Revolution.

In the Punjab, the Green Revolution period was characterized by thesimultaneous occurrence of several changes: new varieties with higherharvest volumes were introduced; irrigation increased and croppingintensified; and cropping patterns shifted toward highly labor-intensiverice. The power requirements, which were rapidly increasing, could havebeen met by additional workers and draft animals, by replacing animal-drawnPersian wheels by pumps and/or by introducing mechanical threshers andtractors. Box table 1 shows the changes in mechanical technology in wheatproduction between 1968/69 and 1972/73. Clearly, threshers and pumpsspread more extensively than did tractor plowing.

Raj Krishna, in a pioneering study based on input and outputtechniques, shows that the following happened to labor input. The laborinput per average hectare of wheat declined by 92 hours from 556 hours. Inrice it declined by only 23 hours from the much higher 946 hours. Withinwheat production (Box table 2) the added irrigation and the higher harvestlabor required for the greater output volume of high yielding varietiesadded 16 and 17 hours/hectare, respectively. Since tractor plowingincreased only slightly it substracted only 5 hours. While the replacementof Persian wheels by pumps reduced primarily draft animal requirements, italso reduced the labor input of the animal drivers. Thus pumps reducedlabor input by 35 hours, more than compensating for the extralabor requiredfor the additional irrigated areas. The biggest labor-saving -- a full 71hours -- came from the introduction of threshers.

However, this is not the full story. How much employment did theshift to labor-intensive rice add? If both wheat and rice are considered(Box table 3), labor input per hectare was reduced by 64 hours. The shifttorice and the added cropping intensity added only 17 and 27 hours oflabor, respectively, while the combined impact of new varieties andmechanization technology reduced requirements by 109 hours, leading to anet loss in wheat and rice of 64 hours.

Nevertheless, we know that during the same period real rural wagesincreased in the Punjab and substantial numbers of seasonal migrantsstartedto come in for the harvest seasons, primarily from impoverished regions ofBihar. Thus, other indirect effects must have increased labordemand and/orreduced the local labor supply to the farm economy. For example, thecalculations do not include the impact of higher farm income on the demandfor labor-intensive commodities such as milk or vegetables.

Data limitations did not permit Krishna to pursue this question forthe Punjab. Instead he used the All-India input-output table toinvestigate orders of magnitude of indirect effects of technical change.He shows that the extra final demand for agricultural output arising fromincreased incomes would have the most powerful effect on employment,followed by farm input demand effects and nonfarm final demand effects.

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1. Chage in MehnclTcnlg1968/69 1973/74

Percentage of wheat irrigated 50 56Percentage of irrigated area using

Persian wheels 22 1Percentage of irrigated area using

pumps 24 45Percentage of irrigated area using

canals 54 54Percentage of output mechanically

threshed 50 90

Percentage of area plowed by tractors 3 10

2. Decomposition uf the Change in Total Labor Input Per Hectareof Wheat

Hours/Hec tare

Total -92

Irrigation effect 16Variety effect 17Tractor plowing effect -5Pumpset effect -35Threshing effect -71Interaction effect -15

3. Decomposition of Labor Use Per Hectare Under Wheat and RiceCTombined

Hours/Hectare

Total -64

Mechanical & biological technology -109Shift of crop mix toward rice +17Cropping intensity effect +27

Source: Raj Krishna, 1975.

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FIGUU 2.L: TRDIDS 0 KLAVESTU COOflr.S rV TsE WORLD, 1963-1983.( 9id - Logarithmic Scale )

10,010 j0 NOTES:

1. With the exception of 'WesternEurope, North America and Oceania

jAPAN and ESIA and the individual coun-tries, U.S.A. and Japan, che re-

1,000 maining country sees nave reducedsamples.. South Asia includes cnlr

_ ! /; wIndia, Pakistan and Sri-Lanka;Sub-Saharan Africa Includes onlyZimbabwe, Kenya, Ethiopia, Sudan,and Senegal; and Latin America .n-eludes only Argentina, Brazil,

iO0 10O Chile, Colombia, Venezuela, Coscab6 Rica and Mexico. Countries vere

i raroved from the set due to theWESTERN non-availability of data.EUROPE

t 2 The data points used to plot theU.S.A. trends were: 1963, 1970, 1980 and

° r'- 11983. The first data point, 1963.NORTR A.ERICA a five-year average for 1961-1965,

a .&! 6 OtC:EANIA was resorted to since a number ofcountries lacked data for 1960 and

w E!}xA periods before 1963. The resc of-_ che data points are real except for

LATIN A.TRICA very few cases in 1970 where da:a_were etther unavailable or Inccn:a-

I - CHINA tible with succeeding years due :aa recount and non-adjust=ent oQ theearlier year figures. In thesecases, a three-year &verage (1969-

SUB-SHA.RQ4 1971) availabl- in FAO Produc:icaAFRICA Yearbooks was used.

-__________________________* /SOUTH ASIA0.1

Source: Data Appendix Tables 8 6 9.

0.01 f7l-`7 VTTT, '7 T 7

1963 1970 1980 1983

YEAR

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harvesting combines came to a halt in the early 1970s. Japan in 1960 hadvirtually no integrated harvesting machinery (Appendix 2, Table 1), butgrowth in the use of this machinery has since been explosive, with theresult that there are now 187 small harvesting combines per 1000 hectaresof agricultural land.

2.23 In the developing world, investment in harvesting combines hasbeen confined to selected regions of a few countries. Argentina is theonly developing country which hiad combines prior to World War II and itcontinues to rely heavily on them. The more prosperous southern regions ofBrazil, Chile, Venezeula, Costa Rica and selected regions of Mexico haveswitched largely to harvest combines in their large farm sectors. In LatinAmerica's poorer regions, however, small farmers continue to harvest andthresh by hand. In Asia combines have started to appear in intensivelycultivated parts of Pakistan, the Indian Punjab, in the Muda region ofMalaysia and on state farms in Northern China. In Sub-Saharan Africa theyare entirely confined to the former colonial farm sectors of Zimbabwe andKenya. Because mechanization of harvesting depends mainly on saving laborcosts, it is rarely profitable on peasant farms in low-wage countries. Thehigher the control-intensity of the operation, the more expensive theharvesting machine, and the higher must labor costs be to warrant using amachine.

2.24 Crop Husbandry. Weeding and cleaning of crops, fields, andorchards are also highly control-lntensive operations. In animal draftsystems, farmers go on weeding by hand long after the introduction of theplow and cart -- until rising wages make herbicides profitable. Wages areso low in South Asia that in most situations it is still cheaper to weed byhand than to use herbicides (Binswanger a.id Shetty 1977).

2.25 Seeding and Planting. Animal and tractor-drawn machines arecapable of greater precision than hand methods for only a few agriculturaloperations, especially seeding and planting. Mechanical means of seedingmay therefore lead to modest direct improvements in yields. The use ofsimple seed drills made of wood and bamboo where the metering of seeds isdone by hand has been growing rapidly In India since 1966 (Appendix 2,Table 4). In Senegal, where ani.al traction is primarily a post-1945development, seed drills have become one of the most popular implements.Improved seed drills, with mechanical dribbling of seeds, for both tractorsand draft animals are becoming popular in South Asia and are one of themore successful machines in Mexico (Appendix 2, Table 6). In all thesecases it is not labor saving which leads to their success, but theimprovement in vields, the saving of seed, mnd the ease of removing weedsbetween rows using animal-drawn hoes. Therefore, in labor-abundantcountries seeding of grains tends to he mechanized before grain harvesting.

2.26 Fertilizer and Pesticide Placement. Although fertilizer can bespread by hand "broadcasting", it produces higher yields if it is dispensedprecisely, either by mnachines or bv hanad placement (mudball techniques andslow release fertilizers). Thus, animal-drawn machines for spreadingfertilizer were developed as fertilizer use Increased . Since fertilizerwas more intensively used in Europe in the interwar period, fertilizer

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distributors were common there. Large cart-mounted barrels for spreadingliquid cow manure were also widely used, as were elaborate pumpingsystems. By contrast, in land-abundant North America the use of liquidmanure was virtually unknown.

2.27 Liquid pesticides cannot be applied without at least a handpump. Even for pesticides in dust form, mechanized dusters achieve higherprecision and reduce waste. Sprayers were developed at the same time aspesticides. In France, foL example, spraying carts were widely used invineyards in 1929. By contrast, in Japan hand-carried power sprayers forrice and other crops became popular only with the development of a muchwider range of pesticides after World War II (Appendix 2, Table 1). Suchpower sprayers are now used throughout Asia, often hired on a contractbasis. The growth of hand and power sprayers is driven by the availabilityand use of pesticides and is widespread even at very low wages. Higherwages lead to the use of larger sprayers which may be animal- ortractor-drawn.

2.28 Economic Interpretation of Observed Patterns. The selective useof new power sources (particularly tractors) for power-intensive operationshas often been viewed as a sign of inefficiency. Since a farmer makes ahuge investment in a tractor, why not use it for all operations?Nevertheless, as long as agricultural wages were relatively low, largefarmers found it more efficient to maintain a tractor and truck along withsome horses even in the UJ.S. and Western Europe. Horses, which wereconsiderably more versatile than the heavy early tractors, did virtuallyall the jobs for which power was not the overriding input. Each powersource specialized in the tasks for which it had the greatest comparativeadvantage. Tractors were mainly used for tillage and as power sources forstationary machines such as threshers, saws, silo fillers, and choppers.The same pattern of tractor use is now common in South Asia, SoutheastAsia, China and the selected pockets of Africa where tractors have beensuccessfully adopted. Only when wages rose rapidly during the 1950s didEuropean farmers start to mechanize control-intensive operations. Althoughmodern tractors are more versatile than prewar ones, wages in manydeveloping countries are much lower than in the prewar United States orpostwar Europe. Low-wage developing countries are therefore likely to makecontinued use of animals along with tractors, until rising wages make theshift of more control-intensive onerations to tractors profitable.

IS SMALTL FARM SIZE AN IMPORTANT CONSTRAINT TO MECHANIZATION?

2.29 While historically countries and regions with large farm sizeswere at the forefront of mechanical innovaLion, and while m8,sive evidenceexists that in each region larger farms adopt mechanized techniques earlierthan smaller farms, the world inventory of machines includes a tremendousrange of machine sizes for virtuallv each agricultural operation.Engineering innovations towards smaller sizes have contributed to thisworld inventory from the land-scarce but high wage economies of Europe and

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East Asia. The tradeoff between larger size and lower unit costs stillexists in many cases but has been considerably eased over the pastdecades. Moreover, the unit cost advantage of large machines over smallerones often derives from the savings of operator labor associated withlarger machine sizes, an issue which may not be very important indeveloping economies dominated by small farms where operator wages aretypically low.

2.30 Tn Japan, power-driven tillage started with small power tillersor garden tractors and the average horsepower rating of the tractor stockhas not greatly increased over time. The successful technical adaptationto small farm sizes is reflected in the explosive growth in the stock oftractors and power tillers, as well as in the rapid growth of harvestingand rice transplanting machinery (Appendix 2, Table 1). It should be notedthat the extraordinary growth of the machinery stock in Japan took place inan environment of rapidly increasing farm protection levels. Whether thetechnical solutionis found in Japan can be economically applied inenvironments with less distorted farm prices is yet an open question.

2.31 The second reason why farm size may be less important thanusually assumed is that, for certain operations, large machines can berented by small farmers rather than bought. This idea has often persuadedgovernments to set up hire stations. As discussed in Box 3, commercialrental markets are more efficient. However, rental markets are far from auniversal phenomenon. For a rental market to be established, the optimalfarm size for using a machine to full capacity must be bigger than that ofnumerous small farms. Because of timing conflicts among farmers it isdifficult for rental markets to emerge for operations which are highlytime-bound, such as seeding or land preparation in dry climates. On theother hand, rental markets function very well for operations which do notneed to be performed at about the same time on different farms: threshingand milling are examples. It is thus no accident that rental markets forthreshing machines were well established in the 19th century in the UnitedStates and are now common all over Asia (Gardezi et al. 1979, Walker andKshirsagar 1981). Milling rice for home consumption can also be done overa long period, and in Asia and Africa it is common for millers to "rent"their machines to customers. Rental markets for land preparation are nowcommon in Asia and Africa wherever tractors have penetrated. Even whereplowing seasons are short, contractors frequently achieve high utilizationrates by shifting among agroclimatic regions.

2.32 The characteristics of rental markets just discussed areconfirmed by some data for machinery rentals in the Philippines (seeAppendix 2, Table 5), which show that most farmers own their animals,carts, plows, and harrows. Harvesting and threshing equipment, tractors,and motor vehicles, however, are used on about five to seven times morefarms than own them, which indicates that rental markets are quite welldeveloped. The availability of small scale machines and of rental marketsthus make small farm size less of a constraint to mechanization, especiallyof the more power-intensive operations which are the focus of much of themechanization observed in low-wage developing economies with small farmslzes. This does not mean, however, that small farm size is not a

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Box 3

The Record of Failure of Public Machine Hire Stations

Seager and Fieldson (1984) have studied 20 government-operatedmachine hire schemes which provided tillage services and other field opera-tions. None of these schemes was able to provide the service withoutincurring heavy losses and most failed completely. The only successfulscheme concentrated on land leveling and did not provide tillage services.In addition, after more than two decades of attempts to make tractorstations successful, China has largely abandoned them, leasing the tractorsto specialized households operating them on their own account.

There are several reasons for the high cost of public hirestations. There are typically no economies of scale associated withoperating large tractor fleets. These services cannot motivate theirpersonnel to high levels of efficiency. Tractor drivers typically do notor cannot be made to benefit financially for working long hours during peakseasons for maximizing the number of hectares tilled, or for keepingtractors in good condition during the peak period. The utilization rate ofthe equipment is very low since the demand for the service is mainly fortillage. Unlike private contractors, public hire schemes typically find itdifficult to allow tractors to cross agro-climatic zones for increasingutilization rates. Finally, where operations are not highly time-bound,private rental markets usually emerge since farmers can schedule theoperation without too much conflict among different users. Where privatemarkets can emerge, public services are not needed. And where privateenterpreneurs cannot operate profitably, public tractor stations will incureven larger losses.

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disadvantage at all, or that machines do not influence the sizedistribution of farms. We will return to the effect of mechanization onfarm sizes in later chapters.

TRACTORIZATTON IN THE DEVELOPING WORLD: TRENDS AND DETERMINANTS

2.33 As discussed already, mechanization through tractors often takesplace following quite extensive mechanization through other means,especially of power-intensive operations. But hecause tractors themselvesrepresent such a significant proportion of worldwide investment inmachinery, we analyze in more depth the trends in tractorizatlon.

2.34 Three major types of tractorization have taken place In thedeveloping world:

o Power tillers and small four-wheel tractors for land preparationin rice and for transport tasks have been widely adopted inintensely cultivated wetland areas of East Asia and parts ofSouitheast Asia. A number of locally adapted designs have beendeveloped in China, Thailand and the Philippines. However, powertillers have been unable to gain an important foothold outside ofAsia (Box 4).

o Four-wheel tractors for land preparation and transport have beenadopted in selected upland regions of Asia, Africa and LatinAmerica. In India and Pakistan the tractors have spread mostwidelv in intensively cultivated regions which have benefittedfrom Green Revolution technologies. Tractors have also found aplace for fairly extensive cultivation under dry conditions as inthe Sind and Ralhastan or in the Kordofan of Sudan. Where farmsizes are small rental markets are frequently well developed.

o Large scale farms in Latin America, Zimbabwe and Kenya usetractors for a broader range of operations. The same types offarms have also adopted integrated and self-propelled harvestingmachinery now common in the U.S. and Europe. In Latin Americathis type of mechanization has enabl.ed large scale farms toconvert from ranching to crop production without having toincrease their labor forces substantially.

2.35 The international comparative data on tractor numbers assembledby FAO and plotted in panel A of Figure 2.2 refer to medium and large scalefour-wheel tractors only, and exclude two-wheel tractors (power tillers orgarden tractors). These numbers also do not capture the selective use oftractors by operations since no comparable data on tractor implementsexist. Finally, the data hide immense variations across regions anJ farmtypes within countries. In Brazil in 1980, for example, 26 percent oftractor stock was concentrated in the state of Sao Paulo while the wholenortheast of the country contained only 6% of the tractor stock (SinopseAgropecuario Do Brazil 1980, 1982 p. 30). Thus the data in panel A of

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lox 4

Power Tillers or Four-Wheel Tractors?

Power tillers (two-wheel or garden tractors) have their greatestcost advantage in the wetland paddy cultivation of smallholders. The smallplots make it difficult for large four-wheel tractors to operate effective-ly, while the tillage implement of the power tiller, the rotary cultivator,is ideally suited for puddling, the preparation of a fine seedbed out of asoil drenched in water. On the other hand the power tiller, as well assmall four-wheel tractors wtth less than about 30 horsepower, is typicallynot competitive with larger four wheel tractors in plowing upland fieldsbecause its limited weight leads to slippage problems.

The adoption of power tillers is therefore most widespread whereirrigated rice is grown on a year-round basis, as in much of SouthernChina, the Central plains of Thailand, or Laguna province of thePhilippines. Its adoption closely parallels that of the water buffalo,another paddy-bound 'technology." It therefore has failed to spread muchoutside of Asia where rice cultivation is less widespread. It has alsofailed to spread in the Punjab, where rice alternates with wheat and landis plowed in dry condition by oxen or tractors. It also has not beenadopted in the outer provinces of Thailand which grow upland crops, uplandrice or rainfed rice.

Power tillers have not been adopted, however, in all regionsspecializing fully in wetland rice. In Java, for example, IRRI studiessuggest that the technology in not economically cost-effective under thevery low wage conditions observed there (Saefudin et at., 1983). The l'wcost of labor probably also constrains adoption in Bangladesh (Jabbar etal. 1983), and perhaps in Eastern India. However, in other regions ofIndia such as Kerala or Tamil Nadu, restrictive technology and trade policymay be the main factor holding back the power tiller. Industrial policyfocussed on setting up collaborative ventures with Japanese manufacturers.The manufacturers produce tillers at costs which, by internationalstandards, are excessively high relative to the domestically producedtractorq. Spontaneous development of locally adapted low cost machines hasoccurred in Thailand and in China. In India such development is impeded bythe trade barriers on imports of power tiller engines. And the import ofcheap Thai or Chinese tillers is inhibited by protective measures in favorof the domestic industry.

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Fr I 2.2 WO: U TUC0 L AnD TRACTOR U0P.SUOVln Dr.-rISZ7S, 1960 - 19S3.C 5~± - >Lgarit.;nc Scale)

?At A PANEL A

rou - WUan S.CTORS TouAL tILACTOR HORSUOUrRJAPAN (include. ?)-Whe1 Tracters)

3100 _- 1A0,000

r > ~~~~~~~~~~~~~~~~~~JAPAJ1/ ~~~~50,000_/

1000 a

Ii. E

1960 190.W90 -E,190170L8

USA5,000

YUA~~~~~~M MEAA

loo M-~~~~~~~~~~~~~~~~~~~~~~~~~IA.0~USA

S0 ^ 5uthAJo ~ ~~~LI wJOSLno ot J Lntntn

8 '~~~~~~~~~~~E~~.A.0 1.0ELI

S.A.

L,A tta Sor IIL'A

a. ~~~~~~~~~~~~~~~~~~~~~~~~~~L.A.L.A.

l0~~~~~~~~~~~~~ A. ~ ~ ~ ~ ~ ~ ~ ~ SSA

S.S.A S.S.A.

00

0. 5 -

0.3 ~ ~ ~ ~ ~ -- 10 ----- - --

1960 1970 1980 1984 1960 1970 1980

YEAR YTAR

LIGDID:

W.I. Western Europe

Kn astern Europe, Middle East and North Africa.N.A.O. North America and OceaniaS.A. South AsiaASiAN Association of South East Asian NationsL.A. LAtin America$.S.A. Sub-Saharan Africa

Source: Data Appendix Table& I & 9.

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Figure 2.2 plot the progress of tractorizat4on in a crude way. Analternative measure uses the data on horsepower (Panel B) which, ascompiled by Hayami and Ruttan, include a rough estimate for horsepower ofpower tillers. The following points are illustrated clearly:

o Over the past two decades, Japan has emerged as the mosttractorized region of the world, measured both in terms of mediumand large scale tractor density as well as total horsepowerdensity.

O Europe's tractorization had surpassed that of North America andOceania by 1960, and it continued to grow more rapidly during thelast two decades. The higher extent of tractorizatton In Furopeis partly accounted for by its smaller farm sizes, but als) byits high output prices.

O Among World Bank borrowers, the EMENA region, comnprising theMiddle East, Northt Africa, Yugoslavia and Turkey, has been themost tractorized region throughout the past two decades. Tractornumbers have grown rapidly at around 12% per annum.

O Latin America is both less mechanized and mechanization thas beengrowing less rapidly than in EMENA. Tractor densities in 198'are less than one-fourth those in North America and Oceania.Farm size duality in much of Latin America partly accounts forthis, since tractorization is often confined to the large farmsector.

o Of all developing regions, Asia has experienced the most rapitdgrowth in tractorization, with tractor densities growing atniearly 14% per annum. The growth rates In numbhers of medium andlarge tractors have been fairly similar in China, Sotuth Asia andthe ASEAN countries. When power tillers are added in, however,(Figure 2.2, Panel B) China has had the most rapid growth and in1980 had a tractor horsepower density about one-third that ofEurope two decades earlier.

o Sub-Saharan Africa is the least tractorized of al1 continents.Tractor densities in 1983 are about the level of those in Chinain 1970.

2.36 A multi-variate analysis of the growth of tractor stocks indeveloping countries was carried out and is discussed in Appendix 1. Itattempts to single out the impact of changes in one determinant of thetractor stock (e.g. wage rates) while holding constant other factors (suchas per capita income). In the real world, of course, the determiningfactors often vary together, but the multi-variate technique used iscapable, in a crude way, of estimating the partial effects. The analysisshows that agricultural intensification has had a major impact on tractorstocks: a 1 percent increase in irrigable area appears to increase tractordemand by about 3 percent. It is therefore not surprising that rapidly

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growing double-cropped areas with good irrigation systems such as those inCentral Thailand and the Indian and Pakistan Punjab are much moremechanized than less intensively farmed areas within the same countries.While the impact of the obviously important output and tractor prices couldnot be investigated in that analysis, other factors are shown to have had asubstantial influence on tractor trends in developing countries:

o Capitai availability, as measured by increases in per capitaincome, accelerates tractorization: A 10 percent increase in percapita income is associated with a 4 percent increase Intractorization.

o Both Improved road density and road quality accelerate the pace oftractorization, as they reduce the cost of servicing the machinesand make them more useful for transport.

o Increased availability of labor, or reduced availability of land --as measured crudely by rising rural population -- tends to slowdown tractorization. A 10 percent rise in population densityappears to reduce tractor demand by between and 3 and 5 percent.But wages, measured by urban wages rather than the very spotty dataon rural wages -- are less imporrant in developing countries thanIn developed countries. A 10 percent rise in urban wages increasest.actorization by between 2.5 and 6 percent in the developed world,but only by about 1 percent in the developing world. This Isbecause wage levels in most developing countries have not yetreached the level where further increases would induce rapidcomprehensive mechanization of control-Intensive mechanization.

The overall interpretation of these trends i3 that when population growthforces a more rapid pace of intensificatIon, the demand for mechanicalenergy typically rises more rapidly than what the growing agriculturallabor force provides.

LAND AVAILABILTTY

2.37 The availability of vast land resources played a major role inthe original development of mechanized agriculture in the U.S. In recenttimes, however, it has ceased to be a major driving force of mechanizationin all but a handful of countries. Today, area expansion is not typicallythe expansion of the agricultural frontier into high quality but unoccupiedterritories. Only where area expansion can be achieved at low cost does itfavor mechanization. The cost of area expansion depends on how costly itis to develop land for crop production (Box 5). The lowest cost is forconversion of high quality pasture into crop farms by mechanization, aprocess wlich was very important in a number of Latin American countriesprior to the 1960s. Alternatively, resident populations can reduce theirfallow periods by a process already discussed. Large scale land

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development in areas previously occupied only by hunting and gatheringpopulations is not usually a cheap option. Infrastructure has to bedeveloped, land clearing costs are high, and land quality may be low in theremaining areas of the world where this optton is feasible.

2.38 Sharp growth in arable land (land used for field crop production,including temporary fallows) is clearly not a widespread phenomenon in thedeveloping world. In only 10 of 34 countries considered has the growthrate in arable land exceeded one percent per year, and in only five did itexceed 2 percent. Table 2.3 lists these countries, along with those inwhich arable land areas declined. In the six countries with rapid growthin arable land, the stock of medium and large tractors grow at almost 11%p.a. In the countries with declining arable land the tractor stock grew at9% p.a. The difference is not statistically significant. Thus areaexpansion does not appear to have been a major force in tractorizatlon.

2.39 In Paraguay, arable land grew at about 4 percent per annum(Column 2). In 1960, arable land was only about 5 percent of agriculturalland (Column 1) with much of the remainder under pasture (agricultural landincludes arable land, pastures and perennial crops). Fxpansion in landarea was primarily at the expense of the latter. Total agricultural lauidgrew at less than I percent per annum. The area expansion was associatec!with a comparatively rapid growth in the agricultural labor force (2.2%p.a.) and an average growth of the tractor stock (9% p.a.). This isperhaps the best example of area expansion at a low cost associated bothwith growth of mechanization nd of agricultural employment. Othercountries in which area expai-ion is likely to have involved substlint½.1conversion of pastures are Tanzania, Brazll and Peru.

2.40 Thailand experienced a very different pattern of area eYpansion.In 1960, 87 percent of its agricul tural land was arable land, The rapidexpansion of agricultural land took place at the expense of forest areas.A detailed look at the Thai data also reveals that fallows declinedsubstantially. Expansion at the expense of forest areas was also importantin Brazil. In neither country is expansion of area at the forest frontiergenerally done by clearing land with mechanical techniques, nor evencultivating it in this way once it is cleared. Instead, land is frequentlycleared wiLh slash and burn techniques. Brazil, while also usingmechanical clearing, still uses an age old system for moving thi frrL,Lierwhich involves the giving of cultivation rights to tenants in exchange fcrreturning the land in cleared condition after sevetel years, usually in theform of pasture. The heaviest concentrations of tractors are not found atthe forest frontier but in the intensively cultivated rice growing -areas ofCentral Thailand and in the wheat-soybean growing regions of southernBrazil. In both Thailand and Brazil rapid area expansion was associatedwith heavy Investment in roads to remote areas.

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Box 5: Environmental Tssues in Land Clearing

While deforestation for agricultura' purposes rai.ses manyenvironmental issues, most of these issues, such as tht loss of geneticresources, go beyond this report because they arise irrespective of themethod of land clearing. For this paper, the issue is not whether to clearland or which lands to clear, but whether more mechanized forms of landclearing damage the soil more than less mechanized ones. Land clearing isan essential operation In shifting cultivation systems. The commonpractice is to fell the trees, burn the vegetaLion, and then cultivate inbetween the standing stumps. Shifting cultivators usually abandon Thesecleared plots to fallow after a few years. On the other hand, ifcultivation continues on the plots, the stuwps and roots decay anddisintegrate within a few years. Thie farmer is then left with a cleanfield. This method causes the least interference with the soil structure.

If the fields must be completely cleared and the stamps imoodiatelyremoved, the farmer has two options: He can remove the stumps r;uaniiallv,

using hand or engine-powered winches, or, ne can use bulldozers. The firstmethod is slow and labor-intensive; the second's erpensive. Destumpingcosts are positively associated with rainfall, and negatively related topopulation density. Destumping costs are very high in the sparselypopulated humid tropics ($600/hectare In the Ivory Coast and $850 perhectare in Cuinea), while they are extremely low in the low rainfallsemi-arid regions ($25/hectare in Central Sudan). Densely populaved areashave lower destumping costs because of shorter fallow oeriods.

Generally, clearing forests manually, or with wi..ches isecologically superior to clearing them with bulldozers. This is notbecause it is technically impossible to prevent damage t.o te,h soilwhen using heavy machinery. If the soils cleared are not highlysusceptible to erosion, then proper implements combined with carefuloperation can technically achieve the desired results. The problem isthat under pressure of time, costs and diVicult access to spare partsand repair facilities, heavy machinery is usually improperly used,resulting in disturbed surface soil stricture and inadequate erosioncontrol measures. Research in Nigeria and in Peru showed that cassavaand maize yields on manually cleared fo'test land were superior tothose on land cleared by a bulldozer (Blom 1985).

Somewhat different problems can also asise when governments attemptto speed up the process of intensification bv providing farmers withmechanically cleared land. These attempts have usualLy resulted in. plotabandonment since farmers in land-abundant en~vlronments do not find itprofitable to maintain an Intensive system of ecK.tivation and soil

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Box 5 - Continuation

fertility maintenance. Nwoko's study in Southern Nigeria found thatabandonment of mechanically cleared land by private farmers was higher, thelarger the cultivable land per capita in the region (Nwoko 1986). Note,however, that this problem of plot abandonment is not a problem of thetechnique used for clearing plots. It would arise if the government haddecided to implement a program of providing plots cleared by any technique.

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Table 2.3: Sources of Area Expansion in Countries with the Fastest andSlowest Growth in Arable Land

A. Countries with Arable Land Growing at 1.5 Percent or More:a/

Arable Land Growth ofas a % of Growth of Growth of Growth of Agric. LaborAgric. Land Arable Land Agric. Land Tractor Stock Force

1960 1960-83 1960-83 1961-83 1960-83(7) (X pa) (7. pa) (% pa) (% pa)

Paraguay 4.9 3.77 0.88 8.91 2.,9

Peru 5.7 2.78 0.09 4.51 0.77

Kenya 19.5 2.45 0.53 0.05 2.74

Tanzania 6.3 2.35 0.23 11.83 2.36

Sri Lanka 36.5 2.31 1.85 19.37 1.88

Thailand 87.4 1.93 1.88 21.71 1.59

Brazil 25.2 1.86 1.66 8.07 0.93

GROUP MEANS 26.5 2.49 1.02 10.64 b/ 1.78

B. Countries with Arable Land Declining:a/

Syria 40.7 -0.77 -0.28 10.80 2.26

Yugoslavia 51.3 -0.35 -0.22 12.65 -1.75

China 31.9 -0.28 0.75 13.47 2.85

Egypt 96.9 -0.18 -0.02 6.27 1.53

Mexico 22.8 -0.08 -0.01 6.92 0.79

Costa Rica 20.3 -0.03 3.05 3.88 1.58

GROUP MEANS 44.0 -0.28 0.54 9.00 1.21

a/ Count includes only developing countries_1 Not statistically significantly different from the means of countries with declining arable

land.The computed t-value was 0.2575.

Source: Data Appendix Tables 8 and 9.

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RECENT RURAL LABOR AND WAGE TRENDS AND FUTURE PROSPECTS

2.41 In developing countries, a high initial labor share in agricul-ture and rapid growth in the aggregate labor force have the consequencesthat only extremely rapid growth in the non-agricultural labor force canreduce the absolute number of workers in agriculture.1 / The consequencesof these demographic facts for the experience of developing countriesduring the 1970s are shown in Figure 1 of Box 6, where the subject isdiscussed in detail. In all developing regions labor shares inagriculture exceeded their GDP shares by substantial margins, implyingsignificantly lower labor productivity in agriculture than in thenon-agricultural sector. Moreover, in Asia and Sub-Saharan Africa theproductivity differential increased substantially rather than declined, aslabor shares declined very little compared to GDP shares (Figure 2.3).Intersectoral imbalances in labor allocation thus appear to haveincreased. Developing countries today also face worse prospects fornonagricultural growth than during the post-war period of exceptionallyrapid growth of the world economy and of world trade, which ended in theearly '80s.

WHAT DOES THE FUTIIRE HOLD?

2.42 Labor forces in agriculture and rural wages are, of course, notonly a reflection of demographic trends and of agricultural mechanization.Favorable economic policies and employment trends in other sectors areimportant, as are international demand conditions for a country'sexportable commodities. And agricultural policies affecting prices, ruralinfrastructure and biological technology have an important impact as well.

2.43 Nevertheless, the demographic forces will still be overwhelmingin many countries. These demographic facts have been used to projectfuture agricultural labor shares and labor forces summarized in Figure 1 ofBox 6. The projection is fairly mechanistic. It first calculates theexpected working age population age 15-64 which still exists at every

1/ A numerical example clarifies this "de\ ;-,pment arithmetic". If 70percent of the labor force is still in agriculture, and the total laborforce is growing at 2 percent per annum, the non-agricultural laborforce would have to grow at 6.6 percent per annum merely to keep theabsolute number of workers in agriculture constant. To reduce theagricultural labor force by even 1 percent per annum, thenon-agricultural labor force would need to grow at an extremely rapid11.3 percent per annum. This explains why the agricultural, labor forcedoes not start to decline in absolute numbers until fairly late in thedevelopment process.

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box 6

Rural Employment and Wage Trends in the Developing World

When the periods of most rapid mechanization started in the developedworld, either during World War II or shortly thereafter, agricultural laborforces were typically well below 30% of the total labor force and popula-tion and labor force growth rates were low. Labor for the nonagriculturalsectors, which grew at rapid rates, had to corn from increased labor forceparticipation rates or at the expense of already relitively small pools ofagricultural labor. Therefore, real agricultural wages rose rapidly andagricultural labor forces declined both in absolute and in relative terms.

With the exception of a handful of middle income countries such asYugoslavia, Argentina or Turkey, today's developing countries face quitedifferent conditions. While the share of agriculture in GDP and in thelabor force have both declined, the decline in the labor share has beenquite slow, leading to an increased imbalance between the sectors. By nowthe share of agriculture in the labor force typically exceeds its share inGDP by a factor of 2 or more. Far from declining, agricultural laborforces have been growing between 1960 and 1980 in all but 7 of 33 develop-ing countries studied. Data on real rural vage rates are spotty, but asTable 1 shows there has been a deteriorating trend in the consumption wage(deflated by the consumer price index) which is the relevant measure ofworker welfare. While in the 1950s, 82S of the recorded cases showedclearly rising rural consumption wages, such favorable trends wsre confinedto only one-third of the observations in the early 1980s. In the 1970s, 5out of 21 countries showed clearly falling real wages and in another 4 theystagnated, while in the early '80. wages stagnated or dropped in 9 out ofthe 13 reported cases. Of course farmers make their mechanization deci-sions based on product wages (nominal wages deflated by agriculturalproducer prices). While product and consumption wages diverge in someindividual countries (Appendix 2, Table 11), their trends across developingcountries have been nearly identical.

Table 1: Number of Developing Countries with Rising, Stagnantor Falling Real Rural Wages*

Real rural wage trends 1950s 1960s 1970s 1980s

Rising 9 11 12 4(more than 1% per year) (82) (64) (57) (30)

Stvanant 1 3 4 3(+1Z to -1% per year) (9) (18) (19) (23)

Falling 1 3 5 6(less than -1%) (9) (18) (24) (46)

TOTAL 11 17 21 13

* Numbers in parentheses are percentages of total.

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TIGU I . ACMUAL AND nOJCTRMS 0f THE S5UM 0 LA30R fN AGRIC=LTMAD A3ZRCmLTMtAL LA3UR xF:dSITT, 1960 - 1980 &ad 2000 - 2020.

PAM.. A PANEL 3

Share of Labor in Agriculture (2) Agri. Labor Intensity

'0~~~~~~~~~~~~~~~~~~~~~T

2000 0p"O ~~~~~LL

600

'00

70070 b. 200

* 0050~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~h

OL- -300

-0 T 200

: ! \ s - ~~ ~ ~ ~~~~~3 | SCFS

O , . . biORN ADU ~~~CA _

30~~~~~~~~~~~~~~~~9

U 0

10

I~~~~~~~~~~~~~~~~~~AI-

19e0 1960 28 2020 20 2020

ACTUAL PRWZUZD

*China's labor force data are &no01alus for the per'od 1957-1963, whenmjor economic reorganization was taking place (See Derubirger it

Barker, eet. al. (eds . ) 1982, pp . 65-7 9) .

Sourca: Appendix 2, Table 10.

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Box 6 - Continuation

Projected agricultural labor force trends are shown in Figure 1. Rapidpopulation and labor force growth, combined with large labor shares, implythat agricultural labor force. will continue to grow rapidly in alldeveloping regions except China, which will start to benefit from itsrecent decline in fertility. In order for the existing powerful demograph-ic forces not to result in rising agricultural labor forces,non-agricultur-al employment would have to rise at rates very much higher than thoseobserved during the 1960s and 1970s. While a number of countries in LatinAmerica will see declining agricultural labor forces, the continent as awhole will possibly have 38% more agricultural workers in 2020 than it hadin 1980. In EMENA, South Asia and ASEAN countries the increase might be ofthe order of 70% to 77% and in Sub-Saharan Africa agricultural labor forcesmay possibly triple during this 40-year span. The alarming Sub-SaharanAfrican prospects arise from the following combination of facts: shares oflabor in agriculture still range between 50 and 79 percent (1983).Mortality rates are still declining rapidly and birthrates are projected todecline only slowly from unprecedented high levels. Moreover, these trendsare not reversible in the medium term, even if fertility started to declinesharply: the labor market entrants for the next 15 to 20 years are alreadyborn.

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FICURE 2.3 CIIANCES IN TIIE SIAKE OF ACRICULTUZ IN THIE LABOR FORCE AND IN CDP.(1960 - 1980)

50 1 - - ---

INA<

40 ASiA

35 SA

0.~~3

2 ~~~~~~~~~~~~~~~~~~~SA

20

Iaaa Afi" A:lsi eeiaSource A )pend s 2, lstbl 10.FIni l 196

101F

0 10 20 30 40 so 60 70 so 90

SIARE OF L.ABOR IN AGRICULTURE (Z)

Legend:WIE Weotern Europe; USA United States of America; SA Soutit Asia; ASEAN: Aswoclatlon ofSoutri East Asiani Nati-ons; 1EKHlA :f.astern Europe. Kiddie East and North Africa; SSA : Sub-Sahtara,k Afrlcni; I-A : IAtin America.

Source: Appe.ndix 2, *i'ble 10. &Initial iboint - 1963

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5-year interval until 2050. It then proceeds to project thenon-agricultural labor force based on an econometrically estimatedrelationship between growth rate of the non-agricultural labor force as thedependent variable and the growth rate of the population 15-64 and theshare of labor in agriculture in the initial period as the independentvariables (Zachariah 1986). It then assigns the remainder of the workingage population to agriculture. The agricultural labor force is thenprojected, assuming the agricultural labor force participation rates of theage group 15-64 will remain constant. These projections are admittedlycrude, and have to be used with much caution, especially at the individualcountry level.. But they clearly show the strong demographic pressure underwhich agriculttural labor markets will be operating in the future.

2.44 We know that far less adverse labor force trends than thoseprojected for many developing countries have been associated withstagnating or declining real wages in both product and consumption terms!in a number of Asian countries (Appendix 2, Table 11). While properdomestic economic policies and favorable international economic growth canobviously offset partially or fully the adverse demogrsphic trends, it ispossible that real wages may be declining rather than rising in a number ofdeveloping countries, and that adverse wage trends are more likely to beconcentrated in countries which already now belong to the poorest ones.

2.45 These tresds are extremely important as a basis for mechanizationpolicy, which canl sharply influence labor demand. In countries with largelabor forces, what happens to labor demand in agriculture will influencenoL only wages in that sector, but also labor welfare for the economy as awhole.

THE ROLE OF LABOR-SCARCITY AND LANI)-ABUNDANCE RECONSIDERED

2.46 The literature on determinants of agricultural mechanization, andespecially the induced innovation literature (Hayami and Ruttan 1985), hasdocumented the importance which labor-scarcity and an ample land endowmenthave had in driving the mechanization process in the developed world. Butthis chapter has shown that mechanization is not driven in very simple waysjust by changing labor to land ratios. We have shown that rapid ruralpopulation growth slows down tractorization, and low wages tend to confine

1/ Because product and consumption wages represent nominal wages deflated,respectively, by an index of agricultural prices and an index ofconsumer prices, it is possible that trends in the two measures of realwages may differ somewhat. Nevertheless, for poor people changes inthe consumer price Index are dominated by what happens to prices ofstaple foods, which may also have a high weight in the index ofagricultural output prices.

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mechanization to the more power-intensive operations. Moreover, areaexpansion has been a much less important driving force in the recentmechanization of the developing countries than one might have expected.The traditional view that mechanization is sharply influenced by land/laborratios needs modification in two further respects.

2.47 First, if endowments in land and labor or their prices werealways the primary driving force of mechanization, Sub-Saharan Africa wouldbe well ahead of India and China in terms of tractor mechanization. ThatSub-Saharan Africa is the least mechanized continent is accounted for bythe fact already discussed that It is difficult to use the plow in shiftingcultivation systems, and that these systems generate minimal transportdemands. Population growth (Up to a certain point), market access andhigher product prices must first transform these systems to the stage wherethe plow becomes economically attractive. Project analysts and policymakers in Africa have often exaggerated the ability of mechanization toreduce costs or slow down the rate of cost increase where wages are low andonly small vield increments can be achieved.

2.48 Second, the widespread use of pumps, threshers and otherstationary machines, andi increasingly tractors in countries like India andtransport operation. (Whether these are economically cost-effective orinstead pushed prematurely by government policies is an issue deferred to alater section.)

2.49 Oulr analysis thus concludes with the following Interpretation.At low levels of population density, population and market growth can beaccommodated by area expansion, but even this area expansion is frequentlyat the expense of fallow land, thus requiring some intensification offarming systems. Wlen fallow lands, forests and pastures no longer provideopportunities for expansion of cultivated area, the pace of intensificationquickens, and the most rapidly so where irrigation investments arefeasible. Intensification is always associated with increases in laborand/or power requirements per hectare and per unit of output.

2.50 While the process of rapid population growth frequently makeslarge numbers of additional workers available, it is often more efficientto satisfy the additional labor and power requirements via draft animals,stationary machines or tractor drawn implements. More abundant labor,lower wages and higher capital costs shift the composition of power sourcestowards human labor, draft animals and stationary power sources, andthey confine the use of more advanced power sources, including tractors, tomore power-intensive operations. Rapid growth of non-farm employment, ofwages and of per capita incomes are required to change this pattern towardsthe co-iprehensive mechanization of control-intensive operations and towardsinte&--;ted and/or self-propelled harvesting machinery. In Chapter 5 weshall -ee that a variety of policy distortions In favor of mechanizationcan acVfeve a similar result.

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Chapter 3: MACHINERY INDUSTRY, INDUSTRIAL POLICY AND TECHNOLOGY TRANSFER

3.1 While the manufacture of basic agricultural tools, such as hoes,digging tools, sickles, machetes and so on, is widespread throughout theworld, more complex machines such a tractors and combine harvesters aremade by a relatively limited range of manufacturers, with internationalmarket supply and trade dominated by a handful of multinational companies.In 1980, total world sales of agricultural equipment were just over US $22billion, with 11 major manufacturers accounting for 70 percent, tractorsmaking up 58 percent of the total, and the U.S. accounting for some 36percent of the total (UNCTC 1983). Five companies probably produced about70 percent of the tractors greater than 30hp in size. The developingcountries, in the early 1980s, accounted for some 12 to 14 percent of worldoutput of tractors larger than lOhp, and perhaps one-third of the smallertractors. Ninety percent of developing country output was produced in just7 countries - Argentina, Brazil, China, India, Iran, Mexico and Turkey.

INTERNATIONAL MACHINERY INDUSTRY

3.2 Though the dominant machinery manufacturers have, in recentyears, turned their attention increasingly to developing countries forsales to substitute for stagnant markets in the developed countries, theyremain essentially oriented towards the latter. It has not been a payinginvestment for them to produce machinery more specifically designed forconditions in the developing countries. This means that the dominantcompanies are producing mainly for a replacement market in which littlegrowth is taking place, a situation characterized by one writer as"vigorous competition in slow motion" (UNCTC 1983). Little of the researchand development effort leading to technological innovation isfocused on conditions in developing countries. It is this fact that hasled some developing countries to set up their own testing proceaures,adaptive research, and even in some instances, to develop their ownindigenous machinery designs. Examples include the two-wheel and smallfour-wheel tractors developed in Thailand, the Swaraj tractor in the IndianPunjab, the Tinkabi tractor developed in Swaziland, the "Turtle" floatingpower tiller designed in the Philippines and the floating tiller of China,various kinds of threshing machines designed for specific crops, andimproved versions of some animal-drawn equipment (Pathom Taenkam 1980,Bhatt 1978, Henderson 1985, Villaruz 1985, Khan 1985, Singh 1981). Furtherresearch work is needed in these areas.

3.3 Major machinery manufacturers develop their marketing plans on anindividual country basis. The main concern for the manufacturer is whethera country has the financial resources to pay for imported machinery and tosustain an acceptable level of imports over time. The main variables

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affecting the purchase price of an imported tractor are specification,freight and insurance, import duties, costs of local assembly, distributorand dealer margins, and manufacturer's margin. Specification, which has todo with such basic features as transmission, clutch and power takeoff, aswell as with numerous optional extra, can change the price by as much as50 percent. Freight and insurance are usually of small consequence but areaffected by whether a tractor is shipped in built-up or knocked-downstate. Among other things, duty levels depend on whether or not agovernment is trying to protect local industry. Assembly costs obviouslyvary with the state of a machine when imported -- completely built-up(CBU), partly or semi knocked-down (PKD or SKD), or completely knocked-down(CKD). The latter requires more labor for assembly, and more costlyassembly facilities. Distributor and dealer margins vary tremendously fromcountry to country, in one study of 17 countries from US $87 to US $6,740per tractor (Agrisystems 1986). They reflect the costs of establishing andrunning a distribution network, the degree of competition in the market,and government control over markups. In recent years, major manufacturershave been discounting ex-factory prices quite substantially, and paringaway their margins in order to sustain market share. Decisions about thesemargins are also influenced by needs of sustaining the product throughafter-sales service and support.

3.4 During the past decade specialty firms have entered the tartssupply business in increasing numbers. Machine manufacturers typicallypurchase components from a host of specialty suppliers. In some casesthese suppliers themselves compete with the major manufacturers when itcomes to supplying spare parts. In other cases, yet other specialty firmsspring up, which may or may not manufacture parts of the same quality asthe originals. These parts may be labelled as if they were originals,however. Such spurious parts are a particular irritant to majormanufacturers, but whether or not they are a problem for the sustaining ofmechanization depends upon their quality in relation to price, the facilityof their supply, and how critical their quality is both for machineperformance and for preventing damage to other important compolients.Spurious parts tend to be aimed at the fast moving (i.e. most profitable)portion of the parts market, such as fuel filters, bearings, pistons, ringsand so on. One problem with this is that it reduces incentives for majormanufacturers to ensure that their machines are sustained by supplyingother, slower moving, less profitable parts.

3.5 Adequate provision of spare parts is critical for keepingmachlinery operating productively. Machines which stop operating because ofa lack of critical replacement components may be rapidly plundered fortheir other components to help keep other machines running. Another hiddencost of poor spare parts supply is "nursing" of machines by their owners,including an unwillingness to hire them out on a contract basis and ensurethey are as fully used as possible (UK, MOD 1976). The proportion oftractors inoperable because of parts problems as well as lack of repairskills has been reported to be as high as 70 percent in certain countries.On the other hand, several countries including India and Thailand havesolved these problems, and the low cost of labor in the servicing industryencourages machine use for more years than is typical In developed

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countries. One reason for parts scarcity is that governments allocatescarce foreign exchange for importing whole machines while overlookingallocations for spare parts. Another is tariff structures whichdiscriminate against parts by comparison with whole machines. A thirdreason may be a proliferation of brands of machinery available. A commonresponse to these problems, especially in foreign-assisted projects, hasbeen to require the import with the new machine of 15 to 2() percent byvalue in spare parts. The obvious disadvantage is the possibility ofproviding spares which are not used for long periods, generating highoverhead costs for stockists which make handling these parts unprofitable.It would be better to allow distributors greater freedom to import partswhen needed, and to get rid of bottlenecks in the supply chain, or in therationing of foreign exchange.

3.6 Three practices common to International. trade in farmi machinery,especially tractors, may cause problems for the sustainability of a machinetechnology as well as making machinery artificially cheap to begin with andmore expensive to continue supporting. These are tied bi-lateral aid,barter, and tendering. The first, which is engaged inTby most majordonors, serves primarily the objectives of industrial exporters in thedonor countries. It creates problems for recipients when the make ofmachinery required by the donor is not a make traditionally supplied to therecipient country, so that the machines lack a support capability.Similarly, if barter purchases a machine for which distribution andservicing arrangements are not in place in the recipient country, such anarrangement may also not be in the country's best interest, in spite of thediscounted purchase price. Tendering may also ignore purchase preferencesof ultimate end users of machinecy, as well as support services and spareparts. Therefore, if the process is to work, very careful specification isneeded (to reflect buyer preference), the ability of the supplier tosupport the product should be assessed carefully, and the pricing analysisshould cover selected parts as well as the initial machinie, By modifyingits traditional bidding procedures in these latter directions the Bank hastightened up farm machinery procurement in its projects so as to overcomesome of the ptoblems of international tendering. In most years,significantly more than one half of the farm machinery supplied InBank-supported projects is procured by various local shopping proceduresnot requiring bidding. Modifications in these procedures also continue tobe made.

DOMESTIC FARM MACHINERY INDUSTRY

3.7 Most developing countries which take up more advanced mechanicaltechnologies begin by importing to meet their equipment requirements.Typically the process of building up domestic industry begins with assemblyof imported equipment which is then brought into the country in PKD kits.Over time many governments apply pressures to "increase the local content",first by more complete assembly (CKD kits) and later by manufacture withinthe country of more and more parts and components. Depending on the state

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of other basic industries such as iron smelting and steel manufactture, rawmaterials may or may not continue to be imported. A more mature machinerumanufacturing establishment includes a wide range of abilities andfunctions, from blacksmiths who make and repair simple tools and metalhardware, through light casting, press work, machining, sheet metal work,and welding to heavy versions of these, plus forging, casting andcomprehensive heat treatment. A mature industry will also have significantdesign, research and development capabilities, and significant expenditureon these aspects.

3.8 For larger tractors, the biggest producing country iio tliedeveloping world in 1982 was India, followed by China, Turkey and HXazil.These four countries together accounted for more than 80 percenit of largertractors produced in developing countries. For power tillers, China itselfmanufactured one-third of world production; two-thirds of the remainder wasmade in Japan. A higher proportion of simpler machines was manufactured Inthe developing countries -- one-third of the threshers, for example, and upto one-quarter of the ploughs -- but a surprisingly low proportion oftillage implements such as cultivators and harrows (Table 3.1). rhispossibly reflects a lack of data. In value terms, thie developing cotintriestook just under 40 percent of world imports, including almost one-half ofthe engines traded, and one-quarter of the wheeled tractors and cultivatingequipment.

3.9 Leaving aside public sector involvement in machinerymanufacturing/assembly operations, the public sector affects the farm.machineryindustry in four major ways: by providing communications andtransportation infrastructure; by establishing the regulatory frameworkwithin which the industry operates; by giving direct assistance ".o theindutstry through training, research and development; and by settingpolicies specifically designed to encourage growth, especially of afledgling manufacturlng capacity. We discuss these in tura.

3.10 Investment in infrastructure has profound implications for alleconomic activity in a country and farm machinery is no exception. Thechief value of good facilities for communication and transportalforl is foTsustaining the mechanical technology after its introduction. The importantvariables here are the distance which a machinery user must travel to reachthe nearest repair facility, the existence or otherwise of mobilemaintenance and repair services, and the means available for repair shopsor parts stocklists to order spare components from large cities, or fromoverseas. Repairs on farm machinery, especially tractors, are highlyseasonal, and there is a premium on turnaround time, especially when someunexpected breakdown occurs during critical farm operations. A wel.ldeveloped communications and transport infrastructure in Theiland hascontributed to thedevelopment of a strong servioe sector and flourishingparts trade, which has supported very intensive use of tractors (Chancellor1983). By contrast, in Sudan, poor roads have contributed to repair andmaintenance problems for cultivation implements (Seager and Fielison1984).

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Table 3.1: Machines Manufactured (Average 1980-1982)('000)

World Develop'ng DevelopingTotal Countrt.s Countries (x)

Tractors above 10 HP 1,734 219 13Garden Tractors 809 247 31Ploughs 958 251 27Cultivators 783 28 4Harrows 774 112 15Seeders 1,496 b60 44Fertilizer Distributors 223 29 13Threshers 113 38 34

Source: UN Yearbook of Industrial Production Statistics.

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3.11 With machinery as much as with any technological innovation,local knowledge and adaptive research is needed. Existing artisanal toolmakers often have or acquire the capacity to copy relatively simpleimplements and machines, and even adapt them to local conditions. Almostall firms in the vibrant farm machinery and implements sectors of Pakistan,India and Thailand emerged in this way. Such firms can produce pumps,threshers, tractor-drawn seeders and, with a good policy environment suchas in Thailand, even power tillers and simple four-wheel tractors. Farmequipment designed on research stations and by public agencies has rarelyfound favor with farmers. It is often so out of touch with fieldconditions, and particularly with the economics of equipment use, that theequipment so developed merely falls by the wayside (Ahmed and Kinsey 1984).

3.12 The evolution of aitisanal tool makers works less well for morecomplex machines needing close tolerances in manufacture. Usually,development of the capacity to translate prototype new machines into blue-prints and precise sets of specifications, as well as to read these andmanufacture from them, takes a considerable amount of time and effort.Design of prototype new machines of the more complex type usually emergesonly when a technology has been in use for some time and a manufacturingindustry is well-established and mature. Moreover, local production ofclassic four wheel tractors has succeeded only in fairly large-scale firmswith foreign collaboration and/or initial government support.

3.13 The first priority in development of the domestic industry isfostering the capacity to copy and adapt available designs. Unimpededaccess by small-scale firms to high quality steel and prefabricatedcomponents such as plowshares or an array of engines is of criticalimportance. Arbitrary import regulation can easily impede localinitiative. Wherever possible, technical capacity should be fosteredwithin commercial establishments. Design engineers in the public sectormight be encouraged to set up their own commercial enterprises, which iswhat happened with the Swaraj tractor in India. In addition, privateinnovators rights need to be protected via patent laws. While mostadaptive research does not lead to patentable innovations, innovators mustbe sure that they can capture the benefits from their innovations shouldthey generate a major one.

3.14 Engineers and machinery manufacturers frequently argue fortraining, particularly for tractor operators and mechanics. While trainingof this sort is available in many countries is usually regarded asinsufficient. The aim in training of operators is to arrive at a situationwhere preventive maintenance rather than forced repairs is the rule,leading to more efficient use of costly equipment. Individual privatefirms may be unwilling to invest in training because of the risk thattrained people may move to oth r firms or employments. As the experienceof Swiss training efforts in Latin America shows, this risk can be reducedby involving mechanics from local repair shops in several short coursesinterrupted by work periods back in their firms. Where the risk of losingemployees is high, and it can be demonatrated that there is an economicpayoff to training, there may be a case for public intervention. This islikely to be better done through incentives offered to private firms, withdirect public sector involvement in training as a back-up.

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3.15 The most common policies which governments adopt to encouragetheir machinery industries are physical or fiscal devices to protect localindustry from foreign competition, such as import duties, restrictions onimports of whole machines or parts, and mandating interchangeability ofcomponents between imported tractors and those assembled or manufactureddomestically. Sales taxes on machinery may also be applied selectively togive an advantage to local production. In most cases governments would dobest by their local industries if they concentrated on removing policydistortions and providing the infrastructure, research and trainingassistance which seem to be most helpful to infant industries. In a fewinstances farm machinery assembly or manufacturing companies have beenestablished in the public sector. In view of the many examples ofsuccessful private sector farm machinery manufacture, and since economiesof scale do not appear significant at output levels typical inmanufacturing companies, there is no compelling reason to continue suchpublic enterprises for long periods of time, but only until they are viablein private hands. It may be more efficient to encourage private firms fromthe beginning and for a strictly limited period, through tax incentives,market protection, credit or direct subsidies, so that risks are shared andfinancial discipline developed.

3.16 From a rather cursory survey of domestic industries, a number ofelements of a sound set of policies for its development can be synthesized.The most supportive action a government can take is to provide basicinfrastructure In communications, transportation and electric power. Newdomestic industry should be built as much as possible by encouraging growthand development of existing capacity. There may be a case for publicsector involvement when a major step forward in manufacturing is involved,but this should be planned to be a temporary situation, to be privatized assoon as possible. Licensing of additional manufacturing capacity may be auseful device to control the pattern and pace of machinery production, butit does add rigidity to a system, and opportunities for corruption. Pricecontrols and profit controls are unnecessary and may be counter-productive. Standardization of components can lower unit costs ofmanufacture and aid maintenance, but it is difficult to introduce when apluralistic manufacturing structure has already been established.

3.17 Domestic content regulation is invariably over-ambitious, withcountries setting targets which are usually attained years later thanexpected (UNCTC 1983). If higher domestic content is forced earlier bystiff tariffs or physical restrictions on imports, the result is usuallymachinery produced at costs considerably above world levels. When agrowing industry continues to be highly protected from outside competition,its costs may be so high that artificial means may be needed to induceuptake of the machinery by farmers. A special concern with tariffstructures is consistency, so that spare parts are not penalized bycomparison with whole machines, nor some kinds of machines encouraged atthe expense of others. Liberal credit to machinery purchasers can sustainthe market for domestic industry, but there is no legitimate case for thisbelng on terms which do not reflect real capital scarcity in the economy.By the same token, as discussed further in Chapter 5, almost any subsidy onfarm machinery is lii ly to lead to economic losses and adverse effects on

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income distribution. There may be a place for public sector researchinstitutions to act as a conduit for machine prototypes to commercialmanufacturers and to assist the latter in the initial stages of building uptheir technical capacity. The record is not encouraging, however, for theemergence of useful innovations from public sector research, and theprocess of adaptation and innovation should be fostered in commercialfirms. Training of machinery operators and servicing personnel may havesufficient of a "public good" character to yield payoffs to its provisionin the public sector.

TECHNOLOGY TRANSFER AND INTERNATIONAL ASSISTANCE

3.18 It is now recognized that much existing equipment can betransferredsuccessfully to developing country farms. In almost all cases,however, success depends on there being established a local manufacturingindustry capable of testing the machines and adapting them to local needs.Many foreign-assisted mechanization projects achieve less that fullyefficient machinery use because the equipment supply is tied to only thosemodels available in the country where the aid originates. There is muchpotential for country-to-country technical assistance among the developingcountries themselves, for the flow of machinery modified in one country toanother where conditions may be similar, and especially for experience froman established manufacturing industry in one country to be used in settingup such in another. Foreign aid open to supporting such transfer would bemuch less constraining than that tied to its own products. It should notbe assumed, however, that equipment designed or modified in one developingcountry will necessarily fit the needs of another.

3.19 In Asia, the UNDP evolved a network concept through whichcountries of the region would share experiences and technologies to promotelocal development, manufacture, and popularization of suitable machines.The Regional Network for Agricultural Machinery (RNAM) was established in1977 (Rahman 1985). A major lesson from the project was that a quiteelaborate infrastructure was needed to make the program work, includingwell-functioning national farm mechanization committees to formulateappropriate policies, national institutes and test centers with instrumentsand equipment for doing design and testing work, and trained engineers inplace throughout the system. Experience has also shown that anestablished, well-functioning local manufacturing industry wlll continue tomake many modifications to the designs of machines they take up forproduction (Mikkelsen and Langam 1981, Campbell 1985).

3.20 One of the few successful cases of publicly-sponsored transfer ofsophisticated mechanical technology is the spread of axial flow threshers,once advanced designs had been developed at the International Rice Research

Institute (IRRI) (Khan 1985). Some of the lessons which emerge fromexperience with the axial flow threshers are as follows:

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o Design, test and commercialization need to be closelycoordinated;

o Because of a lack of market research and product planningstudies, many different threshers had to be developed at IRRIbefore one was commercially successful, and this can be a costlyprocess; releasing designs prematurely can result in rejection ofpotentially good technology.

o To ensure high quality when the machine is first producedrequires careful selection of manufacturers; key factors aremedium size (at least 5-20 workers), innovative ability, qualityconsciousness, location, and long range interest;

o Continued assistance in the design area may be needed even aftercommercialization begins;

o A key deeign breakthrough, whether from public or privatesources, can mobilize the innovative talents of localmanufacturers in developing countries who will develop a verywide variety of commercial designs from the original concept.

TRANSFERRING TO HAND TOOLS AND ANIMAL DRAFT TECHNOLOGY

3.21 Promoting the manufacture of improved hand tools and animal-drawnimplements has many elements similar to those characterizing more complexmachinery. Governments need to pay attention to policies governingavailablity of raw materials and to appropriate incentives to encourageinnovative modifications in areas where the incentive is lacking becausecompetitors cannot be prevented from copying the innovations. Where doesdraft animal power need support? In those parts of Africa where it hasbeen clearly identified that introducing draft animals (oxen, horses ordonkeys, as the case may be) is technically and economically feasible,support similar to that supplied through extension services and/or throughproject packages can accelerate its adoption. Such projects have beensuccessful in regions where rising population, increasing agriculturalintensification, and improved market access have set the stage for itsintroduction. Such extension or project efforts need to recognize all theinternal linkages in integrated crop-livestock agriculture, includingpotential production of meat, milk and manure. In more mature draft animalsituations, a typical project response has been to include allocations forcredit which are used to finance the needed turnover of the stock ofanimals.

3.22 Research on improving the efficiency and productivity of draftanimal systems have often been neglected. It is surprising, for example,how little is known about how animal size, nutrition, and climaticconditions affect work output. Nevertheless, the simplicity of animaldraft technology and its ancient roots means that malor breakthroughs are

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highly unlikely. Research into yoke and harnessing systems may have bornelittle fruit because the efficiency gains of changing them may be smallcompared to the extra costs. Moreover, farmers may be already aware of theexisting alternatives, as in Senegal, where they use a wooden yoke forbullocks, a more expensive collar for horses, and cheap, simple rubberharness straps for donkeys (Starkey 1986a). Similarly, research onimprovements in bullock carts in India has come up with suggesting rubbertires, an innovation which farmers in many parts of India discoveredindependently. At the more complex end, decades of research onmultipurpose wheeled tool carriers have borne little fruit in India orAfrica, while simpler multipurpose tool bars for tillage and crop husbandryoperation have been widely adopted. Where research was not neglected toomuch, emphasis has been placed by publicly supported efforts on design ofnew equipment and on exchange and research-station testing of unprovenprototypes. The emphasis both in research as well as in extension shouldinstead be on the exchange and the on-farm testing of equipment alreadyfully accepted by farmers in similar environments. Networking activitiesamong organizations involved in animal traction therefore requirestrengthening (Starkey 1986b).

3.23 The case for removing biases against animal draft in educationand extension is clearly compelling. For example, even in environmentswhere animal traction is likely to persist for decades to come,agricultural trade schools and universities rarely expose their students --future farmers, extension workers, researchers, and policymakers - to thetechnical possibilities and opportunities of animal draft.

3.24 Some 22 projects supported by the Bank over the past eecade haveincluded most of the investments in Draft Animal Power (DAP) (Table 3.2).Lessons learned from these projects include:

- Farmers will take up DAP only if it is profitable for them.Profitability can sometimes be enhanced by including weeding aswell as primary tillage. Transport will be important, especiallyin peri-urban areas. In addition, the value of meat from cullingdraft animals early will be important to farmers where meatmarkets pay a premium for high quality meat.

O Draft animals and their equipment are costly, and represent avery large investment for farmers adopting DAP. Though removingbiases against animal draft in credit systems may be difficult,it is a high priority. Although it is possible to devise in-kindcredit schemes (with farmers paying back in offspring from femaleanimals), most credit will be in cash terms. Thus farmers mustbe in the market economy to pay back loans. If the animals havebeen purchased by credit, high cost, valuable draft animalsshould be insured.

O In the "take off" phase for DAP in a new area, specialarrangements to supply enough animals may be needed. Beyondthis, providing credit and letting farmers buy their own animalsis the best approach.

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Table 3.2: Selected Bank/IDA-Supported Projects With Animal Draft Components

TotalProject Draft Equip- Total

Country Project Year Cost Animals ment DAP(US$m) (US$m) (US$m) (US$m)

Benin Hinvi 1969 9.6 - - -Zou-Borgou 1972 12.7 - 0.2 0.2

Burkina Faso Bougouriba 1974 10.2 - 0.3 0.3RDF II 1976 16.2 0.5 0.5West Volta 1977 18.9 - - -Bougouriba II 1980 17.5 1.1 1.1RDF III 1982 28.9 3.0 3.0Volta Noire 1982 22.1 5.1 5.1Hauts-Bassins 1982 20.8 2.8 0.9 3.7Koudougou 1982 10.8 0.3 0.5 0.8

Cameroon Northern Province 1980 74.7 4.2 4.2

Ivory Coast Cotton Areas 1974 52.5 1.4 4.3 5.7

Mali Integrated RDP 1974 18.9 - 2.8 2.8Sud 1976 46.3 - 6.8 6.8

Morocco Ag. Credit III 1976 200.3 27.6 - 27.6Ag. Credit IV 1983 602.2 79.9 - 79.9

Niger Maradi 1975 13.2 - 0.03 0.03Dosso 1979 39.3 1.7 6.3 8.0

Pakistan ADBP V 1983 661.0 7.3 - 7.3

Paraguay Rural Dev. II 1977 42.8 2.0 1.5 3.5Livestock 1979 51.8 1.7 4.7 6.4

Senegal Casamance 1971 6.2 0.2 0.3 0.5Sedhiou 1976 14.9 0.8 1.5 2.3

1,991.8 169.7

(Item: Morocco and Pakistan 68%)

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o If there is absolutely no tradition of DAP in a project area,special training arrangements may be needed. Once a few farmerslearn it, it can be left to them.

o In most cases, animals perform far below their potentLcl fortheir size because of poor feeding. Providing more andbetter-quality feed can be an important factor in increasing theproiuctivity of draft animals. Research, and especiallyextension relating to this subject, must deal with the integratedcrop/livestock system.

O Farnters must have ready, reliable access to all the preventivevaccinations, sprays, dips and drenches necessary to combatdiseases and pests in the project area. Draft animals are moresusceptible to accidents than producing livestock, and theirtirinig work makes them more vulnerable to disease. Thereforeimproved curative veterinary services are often needed.

3 Training for blacksmiths, wood and leather workers, and credit toimprove their equipment are important for supporting DAP. Thereally important, adaptive cost-cutting design work for DAPequiplent is best done by commercial firms in a competitivesituation without government interference. Reducing the cost ofprecision seeders remains a difficult technical challenge.

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Chapter 4: THE ECONOMIC EFFECTS OF MECHANIZATION

EFFICIENCY BENEFITS OF MECHANIZATION

4.1 The most obvious benefits of new machines are their substitutionbenefits, their ability to reduce costs of production by replacing draftanimals, human labor and/or machines of earlier vintages. If the resultingcost reduction is large, farmers will respond to enhanced profitability byincreasing area and output, and indirect output effects result. Sometimesmechanization opens up new opportunities, as when the availability of anelectric pump makes it profitable to exploit an aquifer for irrigationwhich would have been prohibitively costly with animal draft or handpowered techniques. Machines can also have direct output effects, as whenbetter seed and fertilizer placement leads to higher yields, or amechanical processing technique reduces post-harvest losses (Box 7). Adirect yield effect might result if machines lead to improved timeliness offield operations. By replacing tedious human labor it reduces drudgery forowners or operators of machines and frees up their time for leisureactivities or for employment outside the farm-household complex. Byallowing farms to grow to larger sizes it can help eliminate rural/urbanincome gaps in rapidly growing economies.

4.2 In discussing the benefits of mechanization we are interested inthe net economic benefits derived by a nation from its incrementalinvestments in mechanization, i.e. the extra output, net of input costsvalued at economic opportunity costs. However, economic valuation ofinputs and outputs is often extremely difficult. Much of the discussion ofthe effects of mechanization has therefore focused on more easilyobservable effects on output and factor use. Beca'ise the focus is on neteconomic benefits, it is important to distinguish conceptually betweeneffects of mechanization for an individual farmer (which may be at theexpense of other farmers) and opportunities for a farming community or theagricultural sector as a whole. For example, a machine may make itprofitable to cultivate larger areas. If the additional area comes fromfallow or reclaimed lands, the machine results in an expansion of aggregatearea. If the area is purchased or rented from other farmers, there is noaggregate area expansion. In the latter case, while opening new privateopportunities, the machine acts mainly as a substitute at the sociallevel. The problem is that many discussions and studies do not make thedistinction.

4.3 The substitution benefits of mechanization are the cost savings(per unit of output) which can be achieved when machines replace humanlabor and draft animals, and older vintage machines. These substitutionbenefits will be higher:

o the more power-intensive the operation being mechanized, i.e.the more labor and draft animal requirements are reduced;

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Box 7

Harvesting and Milling Losses

There is a fairly widespread belief that with traditional tech-niques harvesting and milling losses are large and that technologi-cal innovations are required to prevent these losses. Loss of grainduring harvesting occurs in the cutting, transport, threshing,storage and drying operations. Milling losses in rice are mainly interms of broken grain.

Traditional manual and animal based techniques for harvestingoperations result in grain losses of around 6% of total output forrice (Greeley, 1982 and Laxminarayana et. al., 1981). Mechanizationof harvesting using combines can reduce thispercentage of grain losssubstantially, but with the harvest combines currently in use in theIndian Punjab the savings in grain are completely offset by thecomplete loss of straw for fodder.

Manual rice milling !sing a wooden pounding pole and a pestlehas high levels of losses due to broken grain. Most developingcountries have already made the transition from the traditional handpounding techniques to the use of small scale mechanical mll9s.Timmer estimated in the case of Indonesia that the replacement ofhandpounding by small rice mills would result in approximately a 5%increase in output.

The story is different in Bangladesh, where traditional ricemilling is done by a foot operated mechanical mill known as adheki. The switch from the dheki to a small mechanical mill resultsin a 2% increase in broken grain.

These examples show that shifts in harvesting and processingmachinery may result either in increases or decreases of harvestinglosses and the issue has to be analyzed on a case by case basis.

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o the higher the opportunity cost of labor, as measured by wages orby alternative opportunities available to family labor;

o the higher the costs of draft animals; these costs include thecosts of fodder (opportunity costs of area used to feed them) andthe labor cost of maintaining and driving draft animals; thusrising wages make draft animals less competitive; and

o the lower the opportunity cost of capital invested in the newmachines.

4.4 The overhead labor inputs in maintaining and driving draftanimals are usually much higher than those of maintaining tractors. Forinstance, in Sri Lanka, between 2 and 67 days per pair of draft animals arerequired, depending on the method of maintenance (Farrington andAbeyratne 1982). If a tractor replaces 4 to 6 bullock pairs, laborrequirements for draft animal maintenance would be reduced by between 50 to400 days. Labor requirements for tractor maintenance are considerably lessthan that. Therefore high wage rates often make machines more attractivethan non-mechanized techniques because they sharply increase the cost ofanimal services.

4.5 That wages are an extremely important determinant of the size ofsubstitution benefits is clear from the historical sequence of the mostdramatic mechanization episodes in the developed world, the post World War1I mechanization of a large number of control-intensive operationsdiscussed in the previous chapter. In Europe and in Japan these operationswere mechanized extremely rapidly as a consequence of unprecedented wagerate rises in the 1950s and 1960s. This type of mechanization wasinstrumental in letting labor productivity and farm sizes grow, and therebyallow farm incomes in the developed world to keep pace with income growthin urban areas. This type of mechanization permitted the dramatic declinesof the farm labor forces to a few percentage points of the total laborforce. The share of labor in agriculture declined from 15.8 percent in1950 to 2.7 percent in 1980 in North America and Oceania, and from 27.1percent in 1950 to 7.2 percent in 1980 in Western Rurope. These reductionswould not have been possible if mechanization had continued to be largelyconfined to more power-intensive operations. In these wage-inducedmechanization sequences the substitution benefits did not typically takethe form of unit cost reductions. Instead the more mechanized techniquesstarted to become cost-effective because the wage rate rises drove unitcosts of the less mechanized techniques up faster.

4.6 How Important Are Draft Animal and Fodder Savings? How importantthe animal cost elements can be is illustrated by a comparison of Argentinaand the U.S. in the 1930s, in which case there were 33,000 harvest combinesoperating in Argentina (one for every 500 ha of grain crops) versus onlyroughly twice that number in the United States (one for every 1,350 ha ofgrain crops). On the other hand, Argentina had only 16,300 tractors (onefor every 1,600 ha of crops) versus 920,000 in the U.S. (one for every 160ha of crops). The comparatively small number of tractors is explained by

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the low costs of raising and feeding horses on the abundant land suitablefor forage grasses in Argentina. (Example from Thirsk 1985; Diaz-Alejandro1970.)

4.7 Draft animal savings are, however, a major component of thebenefit of tractorization in South Asia and other land scarceenvironments. A survey of research studies in South Asia which comparedbullock-operated with tractor-operated farms found that most farms whichacquired tractors continue to maintain some bullock pairs. This is areflection of the draft animal-tractor complementarity discussed in Chapter2. Nevertheless, most of the tractor-owning farmers reduce draft animalsstocks by at least 40 percent and often more. Because the remaininganimals are used for a limited number of operations, the farmers reduce thehours of draft animal use by even more than their stocks.

4.8 Just as fuel or electricity enters the cost of machine services,fodder enters the cost of draft animals. Low fodder costs are typical offarming systems with abundant grazing land, ample crop by-products, orwhere the opportunity value of the fodder or crop by-product in livestockproduction is low on account of limited output markets for livestockproducts.

4.9 At the other extreme of hlgh population density and small farmsthe competition for fodder becomes so keen, and power requirements per farmso small, that farmers elect to use cows for draft rather than oxen. Thispractice is common in Bangladesh and in Egypt, but virtually nonexistent inareas more favorably endowed with land. Jabbar (1980) reports that inBangladesh 40 to 50 percent of draft animals are female and that thisproportion has been increasing. Draft appears to reduce milk output ofcows somewhat, but this practice is still a viable component for thoseareas.

4.10 A conceptual. problem often occurs when it is argued that reducedfodder requirements are an independent benefit of mechanization becausethey translate into increased food availability, either by enabling cropsto be produced on land formerly devoted to fodder and/or by enabling milkor meat production to expand on the basis of the fodder available frompasture lands or crop by-products. At the national level such an argumentis not valid. If draft animals, including their fodder costs, are acheaper source of power than internal combustion engines, then the fuelsavings and reduced machinery investment costs can be used for food importsto offset reduced domestic food production associated with the use of draftanimals. Whether the foreign exchange savings on account of reduced fuelrequirements are sufficient to offset reduced food production is anempirical question. For individual farm households the issue is the same.For a well-off farmer the reduced fodder requirements may be reflected inhigher sales of crop or livestock output, but that has to be weighedagainst the increased capital and fuel cost associated with the machine.For a poor farmer who can only use rented machines, and who could use theextra agricultural output for home consumption, the cash outlay for rentingthe machine must be less than the cash outlay would be to buy the extra

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food he needs if he has to feed the animals. Since the question is one ofrelative costs of fodder, capital and fuels, only location-specificanalysis can resolve it.

4.11 Indirect output expansion occurs as a consequence of thesubstitution benefits. When costs fall, the mechanized enterprises becomemore profitable (so long as a decline in product price does not offset thecost reductions). Farmers respond to this increased profitability in thesame way as they would to an increase in the output price. What dieterminesthe slze of the indirect output expansion? In land-scarce environments,farmers may be prevented from expanding output by the scarcity of land orthe high costs of developing it. Their attempts to increase area willdrive land prices or land rents up and the benefits from the input savingsare capitalized into the value of land. Where !and can be developed at alow cost from pastures or fallow areas the same substitution benefits canresult in a larger aggregate output expansion than in an environment whereland is scarce. The availability of yield-enhancing technology may have asimilar effect.

4.12 A second constraint to output expansion can arise from the outputmarket. If final demand is negatively responsive to price, individualfarmers who mechanize may expand their output (e.g. by expanding cultlvatedarea), but this will lead to a decline in product price, and to lowerprofits for farmers who have not yet mechanized. The smaller the(absolute) elasticity of final demand the greater this effect. The outputexpansion of the mechanizing farmer is then at the expense of those who lagbehind. This is an issue with any technology adoption process, of course,not Just for mechanization. The benefits from technical change are oftenpassed to consumers via Jower prices. What makes the problemdistributionally relevant in the case of mechanization is that where largemachines are involved, the output expansion may remain confined to thelarger farmers and the size distribution of income within agricultuire mayhecome more skewed or unequal.

4.11 New opportunities may be opened by mechanization when theinvention, adaptation or adoption of machinery permits farmers to engage inenterprises which are technically feasible using only labor or animal draftbut would he prohibitively costly without a machine. Therefore cases ofnew opportunities are more likely to arise in power-intensive operations orwhere wages are high. The following examples are relevant illustrations:

o the lowering of transport costs via carts, tractors, trucks, carsand buses has been central to the process of convertingsubsistence agriculture progressively to production for themarket;

o the lowering of labor costs via machines has frequently been aprecondition of expanding the aggregate area cultivated. Tractorcultivation has enabled owners of large holdings all over LatinAmerica to convert from extensive cattle grazing to cropproduction. Similarlv, the mechanized farming scheme in the

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Central Plains of Sudan has converted 3 million hectares tosorghum production since its inception in 1944 (Pingali et al.1986);

o electric and diesel pumps have made possible the economicexploitation of aquifers for irrigation purposes which could nothave been economically exploited using animal draft or water andwind power; both South Asia and China have experienced dramaticincreases in this use of engine power.

The common feature of these "new opportunity" cases is an increase inagricultural output and employment in the regions affected, For example,Thirsk shows that between 1951 and 1964 the area of the mechanized cropfarm sector in Columbia increased by 79 percent. Value of output in themechanized sector increased by 147 percent and employment by 127 percent(Thirsk 1985, Table 6). All over Asia, intensified irrigation via wells ortubewells has had substantial output effects (Ishikawa 1978; Shah 1979).

4.14 When a country can export at a constant price any extra outputmade possible by mechanization in a particular region or farm sector thecase of seizing new opportunities (at undistorted prices) presents noadverse eauity issues: employment expands, wages and welfare of workergroups may rise, and no other farmer group finds its output pricesdepressed. The only possible adverse impact on other farmers may be thatthey face more competition for labor and othet factors of production, butany positive development in the economy would have similar effects.

4.15 Final demand may, however, be inelastic, i.e., the added produc-tion may depress prices at the national level, such as in the case of homegoods, or for traded goods such as sugar where importing countries imposequota restrictions or where the markets are thin. A region or farm sectorgaining comparative advantage may then impose losses on another region orfarm sector which also produces the commodity but does rlot experience thecost reduction. Of course, the losing region may then curtail output andfarm employment. Note that this type of general equilibrium effect ariseswhether comparative advantage has been gained via mechanization or anyother form of technical or institutional change. As long as incentives formechanization have not been artificially distorted, it is difficult toargue for an intervention reducing the pace of mechanization, especially ifthe price declines themselves impart consumer benefits to poor populationgroups. However, when analyzing the full effect of distortions below,these general equilibrium effects must be accounted for (see Box 9 InChapter 5).

4.16 Direct Output Effects: Where substitution benefits are lowbecause an operation is not power-intensive, because wages and fodder costsare low, or because indirect output expansion is constrained by the highcost of area expansion, the question arises whether mechanization hasdirect output effects. Not surprisingly the research on direct outputeffects has concentrated on land-scarce environments of Sooth Asia, where

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substitution and indirect output effects are sharply limited for manyoperations. The South Asian experienc.e is likely to become relevant for anincreasing number of developing count.ries.

4.17 Yields: On many soils improving tilllge qaality call raise yieldsby reduclng weeds, by better incorporation of crop residue..s and manure intosoils, or by improving access of roots to water aot(! air. Gradualimprovements in these components of tillage quality were clearlyiuistrumental in raising yields in the second agriculttral revolution ofEurope in the 18th and 19th century. This higii tillage quality can beachieved, however, by tractors or by animal draft.. It involves changingthe design of the plow, increasing the number of passe-s with a given plow,or adding harrowing or levelling to the primary tillage operation. Inequestion is therefore not whether improved tillage increases yielir, butwhether or not farmers need a more advanced power source to imptove -illagequality, or use it for this end if :hey do take it up.

O A review of nearly 50 studies in As.-A (T-ibles 4.1 and 4.2)suggests that farms with tractors and power tillers may quitefrequently have somewhat higher yleldxi t:ian the farms thatuse only animal draft or hand hoes, with which they have beencompared. However, their advantage is unlikely to be caused bythe machine. Rather it is attributable t.u "!'.h'r levels offertilizer inputs and/or better irrigation. Trese higher inputsare associated with the better capital -osition and perhapsmanagerial skills of the mechanized farms rat'her than beingcaused by the tractor.

o The rapid replacement of anImals by tractors fo.- primary tillagein the U.S. took place between 1920 and 1940.. Yet the averageyields of corn and wheat d'd not start to ris.! ,ntil well intothe 1940s 4hen varietal -hivnges and fertilizer became the mailsource of yield gains.

O Even when shifting from hand hoes to draft animals, improvingtillage quality does not appear to be the primar- motive. of the14 Sub-Saharan African studies reviewed whict compare yields onhand-hoe and animal draft fnris (Table 4.3), 8 show nodifference, 2 show lower yielts on Enimal draft farms and only4 show higher yields. On the other hand, in all caseq animaldraft farms have larger a-ess per persotb. Private araa expansior.and the increase in labor productivity clenrly appear to be morepowerful motives for the ado;,tlon of draft animals than tillagequality. Other factors associated with integration of livestockinto a cropping system - such as use of crop residues andproduction from livestock -- also may have played a role.

4.18 Cropping Intensity: Labor and/or power requirements expand whencropping intensity increase in a particular region. These expanded powerneeds can be met by increasing the lab'or foree, by adding drift animals, or

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Table 4.1: Sumary of Comparisons Between Tractor-Operated and Animal Draft Farms in Asia

Less than -30 to -10 to 10 to Greater thanPercent Difference -30 -10 +10 30 +30

No. ofStudies Percent of Studies

A. Four Wheel Tractors Versus Animal Draft Farms

Fertilizers, etc. 45 4.4 4.4 20.0 24.4 46.7Irrigation 42 4.8 4.8 33.3 23.8 33.3Individual crop yields 118 0.9 7.6 41.5 35.6 14.4Intensity 96 0.0 5.2 68.0 22.7 4.1Total Crop production 62 0.0 1.6 19.4 43.5 35.5Labor/Ha. 82 3.7 34.1 43.9 14.6 3.7Labor/Unit ofTotal Production 55 32.7 40.0 27.3 (.0 0.0

B. 'wo Wheel and Garden Tractors Versus Animal Draft Farms

Less than -10 to Greater than-10 +10 +10

Fertilizers, etc. 16 0.0 18.8 81.2Individual crop yields 20 15.0 50.0 35.0Intensity 13 0.0 84.6 15.4Total crop production 3 0.0 (.0 10(0.(JLabor/Ha. 24 62.5 37.5 0.0Labor/Unit ofTotal Production 9 77.7 22.3

Source of Basic Data: Binswanger (1978), Herdt (1983), Aguilar et al. (1983), Saefudln et a1.(1983), Maamum et al. (1983).

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Table 4.2: Paired Output and Input Differences Between Tractor and Bullock OperatedFarms For Cases Where Tractor Farm Appears to Have Substantial ProductivityAdvantage a/

Output Difference Input DifferenceExceeds Exceeds

Comparison Comparisons Input Difference b/ Output Difference b/

Yield Difference versusFertilizer Dif.erence 22 7 15

Total Production Differenceversus Difference in Fertilizerand Other Inputs 14 4 10

Total Production Differenceversus Irrigation 22 13 9

Cropping Intensity Differenceversus Irrigation 9 3 6

________ _ ____ __ __ __ __.__ __-

a/ Output difference exceeds 10% of level of bullock tarm.

b! Differences are compared in percentage terms.

Source of Basic Data: Binswanger (1978), Farrington (198'), Maamum et al. (1983).

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Table 4.3: Summary of Comparisons of Animal Traction FarmsWith Handhoe Farms in Sub-Saharan Africa

Average AbsoluteLevels

Cases Handhoe AnimalMeasured Number of Cases With Effects: Farms Traction(out of 22) Positive No Diff. Negative Hectare Farms Ha.

Yields perHectare 14 4 8 2

Area perFarm 17 17 0 0 3.3 6.6

Area perPerson 19 19 C 0 0.55 0.68

Land Use forMarket Crops 19 12 7 0

Source: Pingali et al. (1986).

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by investing in stationary or mobile machines. In both India and Chinalabor and draft animals have grown substantially over the past 20 years,even though mechanical power has also expanded very rapidly. Even withmachines there are usually several options. For example, a power shortagefor plowing can be met by adding tractors. Where draft animals are usedfor threshing, a threshing machine can release draft animals for plowing.Indeed, in the Indian Punjab threshers have probably been as important astractors in increasing the regional farm power available (Box 2 of Chapter2). The relevant question is therefore not whether higher intensityrequires more power, but what is the most cost-effective mix of differentpower sources and of different types of machines.

4.19 In order to make intensity an additional component of benefits itmust be shown either that certain levels of intensity cannot be achieved byhuman labor and animal draft alone, or that the availability of the machineper se, leads to a gain in intensity. We have seen in Chapter 2 thatintensity is a major determinant of power demand. The issue here iswhether engine power is the only or the cheapest way to meet that demand.It is clear, however, that there are many regions where extremely hilhlevels of intensity have been achieved with little mechanical power._/Technically, labor and draft animals can achieve very high croppingintensities if sufficient irrigation is available. Whether availability oftractors causes higher cropping intensities on farms which have themrelative to farms which do not is a more difficult question. Intensitydifferences and irrigation differences have been documented Ln 42 studiesI, South and Southeast Asia. These comparisons leave little doubt that theIrrigation advantage of tractor-operated farms substantially exceeds theirmechanization advantage and it is not possible to attribute the higherintensities to the tractor.

4.20 Timeliness: When cropping intensities increase, and especiallyto the p',1nt .hen it becomes necessary to grow two or three crops per yearon a p] )t of la-d, timeliness and speed of operatioas become more and moreimportan'. The common percept4on is that advanced, large scale machinesare faster Lkan humans or draft animals, and are therefore essential toimprove tirteliness. Timeliness of operations can be increased in differentways, however. The most cost effective way to do so may not necessarilyinvolve large ma-hines such as tractors and harvest combines. Considersome options for a hypothetical farm of 20 hectares:

l/ For example, bullock farms studied by Mandal and Prasad in Biharoperated at a level of intensity of 200. Many areas of Java operate atthe same or higher levels with virtually no tractor input. In Taiwan(China) the multiple cropping index stood at 185 in 1961 when therewere only 3,700 power tillers. It declined slightly to 179 in 1971when the number of power tillers reached 22,000 and to 168 when itreached 68,000 in 1984 (China Statistical Data Book 1985). Many areasin the East Africa highlands also grow two crops per year even in theabsence of animal draft.

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o If a 30hp tractor cannot achieve a desired level of timeliness,tractor size can be increased -- at a cost - to 5Ohp or to 70hp.

* If 3 bullock pairs and their drivers alone cannot achieve suffi-cient timeliness, a fourth can be added -- again, at a cost -- ora fifth. To have numerous pairs of bullocks is to have greaterflexibility than to have one tractor, especially in the event ofbreakdown. More labor must be added, of course, with each addi-tion to bullocks.

O Alternatively, a farmer who has three draft animal pairs or one30hp tractor might buy a stationary threshing machine which willrelease tractor or draft animal capacity for plowing during thecrucial turnaround time between two crops.

O The farmer may lengthen the turnaround period by plantingshorter-season varieties, or a crop with a shorter crop cycle.

Thus the higher speed of tractors or other machines may or may not be aneconomically relevant benefit of mechanization. Mechanized farmers must beable to achieve their operations in a more timely fashion not just on anindividual field, but on the average plot of their usually larger farms.And the timeliness should result in either a iaasurable yield advantage ora measurable increment in cropping intensity. We have just seen, however,that it is unlikely that the yield and cropping intensity advantages ofmore mechanized farms are caused by mechanization. Thus the indirectevidence for an average timeliness advantage is not compelling. Directcomparisons of the exact timing of crucial operations on tractor owning oroperated farms and animal draft farms is available for six regions of Asia,and these studies, also, found little, or no timeliness advantages(Binswanger 1978, Pudasdini 1979, Herdt 1983).

4.21 Why should the evidence not be in favor of a timelinessadvantage? The main reason may simply be the economics of capacityutilization. On a 20 hectare farm a 35hp tractor may be able to achievethe same timeliness as three bullock pairs. Investing in a 50hp tractor ora fourth bullock pair may both improve timeliness, but the utilization rateof the tractor or of the bullocks may decline, leading to higher costs. Itis only to the extent that additional tractor capacity is cheaper thanadditional bullock capacity that tractors will provide a timeliness gain.Note that most advocates of mechanization stress the need for high annualutilization rates of tractors in order to make tractors cost effective. Inland- and capital-scarce environments, farmers have in general responded tothe requirement for high capacity utilization of the machines by spreadingthem thinly over larger areas rather than concentrating them on small areasto improve timeliness.

4.22 To SumlL:* Empirical evidence does not support a strongcausal link between the availability of tractors and increases in cropyields, intensity levels or timeliness. This does not mean that bettertillage cannot result in increased yields, but that farmers in general donot achieve better tillage when they adopt machines. It also does not mean

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that more timely planting does not raise yields or increase croppingintensity, but that the extra power requirements for intensive irrigatedfarming systems can be provided in alternative ways and that the tractor isfrequently not the most cost-effective means of providing the extra power.

4.23 Reduction of Drudgery. There is no question that mechanizationreduces drudgery in agriculture, and the more so, the more power-intensivethe operation. However, this is not an independent economic benefit whichwould justify subsidies for mechanization, as some have argued. If farmerswant to reduce the drudgery of their own work they should be willing to paymore for machines than if drudgery were not reduced. They are aware ofthis benefit and can fully capture it. They will include it in theirdecision making in the same way as a homeowner who buys a washing machine.No case can be made for subsidizing either type of investment. Where afarmer invests to replace hired labor, reducing drudgery of the hired laboris irrelevant to the farmer's decision. The workers, on the other hand,have chosen to engage in the tedious operation at the offered wage. Ifthey could achieve a higher level of welfare in an alternative job theywould not have been willing to work in the operation involving thedrudgery. Unless they are able to find equivalent work opportunities andwages, relieving them of drudgery via mechanization therefore must reducetheir welfare, not increase it. That many hired workers in developingcountries are willing to work for low wages in tedious and hard farmingoperations is a reflection of their extreme poverty and the absence ofalternative opportunities.

EMPLOYMENT AND INCOME DISTRIBUTION

4.24 Until now the labor input has been viewed as a cost component.What is a production cost to the farmer, however, is income to the worker.Mechanization policy must take account of possible employment and incomedistribution consequences. The first issue is the distributional conse-quences of genuinely cost-reducing mechanization in an undistorted environ-ment. This will be discussed now. The issue of efficiency and distribu-tional consequences of distortions is simpler and is deferred to later.

4.25 All improvements in process technology reduce some or all inputrequirements per unit of output. Mechanical or labor-saving technologiesreduce requirements for labor more than, for example, those for land, whilenew high yielding varieties may have a neutral impact, or raise output perunit area more than they reduce labor per unit of outpuc, thus resulting ina net rise in labor per unit area. All cost reductions provide incentivesfor indirect output expansion. If final demand is inelastic, the outputexpansion will be less than the reduction in some or all of the inputrequirements. Therefore some or all factors of production will see theiroverall demand decline and the owners of agricultural resources -- be theyowners of land, labor, or capital -- may ultimately lose from any technicalchange, whether it is neutral or land- or labor-saving. The gains fromtechnical change are passed to consumers.

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4.26 When considering the effects of mechanization, which in technicalterms is a labor-saving technical change, it is very important to considercarefully the options available. The simplest case arises when theadoptlin of one technology is at the expense of another one -- the mutuallyexclusive case. For example, when large integrated rice mills areintroduced into a region, small rice mills cannot be introduced at the sametime because the large mills pre-empt the market. If both types of millsreduce cos.s by the same amount but the large mills save more labor it isobvious that labor incomes must be hurt. As we show later, this resultholds even when all general equilibrium effects are considered. This is animportant result because mutual exclusiveness can arise in several ways:two technologies may compete for the same market, for the same privateinvestment budget, or for the same government budget. For example, thechoice may be between using a limited investment budget for irrigationpumps or for harvesting machinery. Most importantly, the issue ofmechanization subsidies revolves around whether to allocate limitedgovernment resources to this purpose or to other mutually exclusive ones,such as agricultural research and extension, improvements ininfrastructure, or nonagricultural uses. Thus subsidies both acceleratemechanization and preclude alternative investments.

4.27 In many cases, however, options are not mutually exclus've. Forexample, when debating the merits of cost reducing rice milli forBangladesh -- irrespective of the type of mill - the long-run alternativeis no mills at all, with society forgoing the possibility of lower costrice. This case Is analytically the most difficult and needs a moredetailed discussion. Of course, in a dynamic economy, mechanization isonly one change which affects employment and income distribution. In thediscussion below a statement that employment or wages will fall (or rise)will therefore mean the change which introducing mechanization will make tothe employment or wage trends already under way on account of demographic,macroeconomic or industrial trends, etc. If wages are already rising inthe economy at large, mechanization which reduces labor demand may not leadto a fall in wages but instead slow down their rise.

WHEN TECHNOLOGIES 4RE NOT MUTUALLY EXCLUSII'Z

4.28 Labor Reguirements. Unless they introduce new opportunities -- acase which presents few distributional problems - mechanical technologiesreduce labor requirements per unit of output. The reductions in laborrequirements vary by the operation, the nature of the machine and the laborintensity of the pre-existing technology. For example, where a harvestcombine replaces reaper-binders and stationary threshers it reduces laborrequirements much less than when it is introduced where harvesting andthreshing are done entirely by labor and animals. (A major reduction hereis in labor for care of animals versus care of machines.)

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4.29 Labor Demand in Agriculture. For any given reduction in laborrequirements, what happens to agricultural labor demand depends on theextent of the indirect output expansion. As discussed before, the indirectoutput expansion will be the larger, the larger the elasticity of finaldemand and the lower the cost of expanding area. If more employment isgenerated by the indirect output expansion than is lost because of reducedrequirements per unit of output, the demand for agricultural labor willincrease. On the other hand, if a lot of labor is displaced but the unitcost reduction is small (as with harvest combines in the Indian Punjab -discussed in Chapter 5) the output expansion effects will not make up forthe labor losses. In technical language, whether labor demand increases oris reduced depends on whether the indirect output expansion effectdominates the substitution effect or not.

4.30 Agricultural Labor Welfare. Changes in the demand for labor willaffect labor welfare via changes in unemployment, labor participation,hours of work or by inducing migration. Which combination of labor marketadjustments will result depends on a number of local labor supplyconditions. Moreover, in different settings the various sub-groups ofworkers -- family members, tenants and hired laborers -- may see theirwelfare affected in different ways, an issue which goes beyond the presentstudy. The overall effect on labor can, however, be summarized by whathappens to the agricultural wage bill which includes both paid out wagesand those imputed for family labor. If mechanization reduces the overallagricultural demand for labor the agricultural wage bill and labor welfarewill decline; and the wage bill will rise if the demand for laborincreases.

4.31 Many rural households provide not only labor to agriculture butalso supply land and management skills. Changes in labor and farm profitcomponents of income affect them according to the proportion of Income theyderive from these sources. Generally the poor derive a greater proportionfrom labor income or imputed wages than from the physical capital they own,while the opposite is true for the wealthy. Heterogene&ry is great,however, and some small farmers may be poorer than some farm laborers. Theextent to which laborers own land, or come to own machinery, willcritically affect the income-distribution consequences of mechanization.The functional income effects give an approximate indication of theexpected impacts on poor and wealthier groups.

4.32 Price Effects: Where the final demand for agricultural productsis inelastic, indirect output effects will be small and the wage bill willdecline as a consequence of mechanization. Where mechanization involvesfood crops, food prices also decline, however, and the gains frommechanization accrue primarily to consumers. As a group, poor agriculturalworkers, who tend to spend a large share of income on food, will alsobenefit from the decline in food prices. These food price effectspartially offset the decline in the agricultural wage bill.

4.33 Other General Equilibrium Effects: Where the agricujltural wagebill declines (or rises less rapidly than in the absence of cost reducing

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mechanization) the economy experiences a gain in income, provided thecapital invested in mechanization is more productive than the investmentforgone in the other sectors of the economy. Whether the income gainaccrues primarily to farmers in the form of higher returns to their ownedassets, as in the case of elastic demand, or to consumers in the form oflower food prices as in the case of inelastic demand, the economy-widedemand for some goods and services will increase, generating moreemployment elsewhere in the economy. Reduction in employment and the wagebill in agriculture will impose losses on farm workers in the short run andmay speed up rural-urban migration. Neverthelesss, labor welfare may stillincrease in the long run if labor mobility and the ability to absorb thislabor in the non-agricultural sector is suffictently high. A numericalexercise on the Japanese economy illustrates sone of the generalequilibrium effects mentioned here (Box 8). The definition of 'long runis, of course, extremely important for the welfare of the families oflaborers thrown out of work. Governments may have to adopt specificmeasures to address their welfare needs until the economic adjustments havetaken place, or assist them by supporting training and relocation.Moreover, rigidities in nonagricultural labor markets may limit absorptionof labor in high growth industries even in the long run. Policy measxlreshave to address these issues as well to prevent adverse effects ofmechanization.

4.34 Relative Income Distribution. Residual farm profits accrue tothe owners of fixed factors of production: land, capital and/or managementskills. On a per unit output basis the demand for these factors is notreduced by mechanical technology, but the demand for labor almost alwaysis. Whatever the indirect output expansion, and whatever the generalequilibrium effects, the initial differential in factor requirements willtend to favor the factors of production to which residual profits accrueand therefore improve their relative position compared to labor. Thegeneral equilibrium simulations with Japanese data bear out this point (Box8).

4.35 To Summarize: When technologies are not mutually exclusive, thedistributional consequences are hard to predict.

O While labor requirements per unit of output are typicallyreduced, labor demand and the agricultural wage bill may rise orfall depending on whether the outptut expansion effect dominatesthe substitution effect.

O Even when the agricultural wage bill falls, laborers may stillgain from lower food prices made possible by mechanization.

O When mechanization reduces economic costs it raises real incomesof either producers or consumers. In the long run these incomegains may generate labor demand elsewhere in the economy, thusoffsetting any short-run losses experienced by rural labor. Ofcourse when short-run losses occur, they fall more heavily onolder or otherwise less mobile workers. Until economic

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BOX 8

General Equilibrium Effects of Adopting AlternativeTechnical Innovations in Agriculture

An Example Using Data From Japan

Granted that labor-saving technology has general equilibrlumeffects, will workers ultimately gain or lose from these effects? Theoryprovides no general answer. It depends on how sharply new technologiesreduce labor requirements relative to costs.

A numerical exercise on the Japanese economy illustrates somepossibilities. Its results are outlined in Table 1. They emerge from asimple two sector model which takes the availability of land, labor andcapital as given. It then allocates labor and capital within the model tothe agricultural and non-agricultural sectors, while land is used exclu-sively for agriculture.

The numbers in Table I show the percentage changes in variableslisted on the left side of the table in response to a one percent increasein agricultural productivity (of either the neutral or the labor-savingvariety). The open-economy case (infinitely elastic final demand foroutput) and the closed economy case are opposite extremeb. The real world- either of Japan in the 1930s or today's developing countries - fallssomewhere in between these extremes.

When the economy is open, either form of agricultural productiv-ity growth sharply increases agricultural output, employment, and the wagebill (Columns I and 2). The wage rate barely rises. The major gainers arethe landowners whose farm profits increase sharply.

When the economy is closed, total agricultural output does notincrease as much as the (one percent) growth in productivity (Columns 4 and5). This reflects the inelastic demand for agricultural output. As aresult, agricultural employment falls, real wages do not change much andthe real agricultural wage bill falls.

In the general equilibrium setting modeled here, workers wouldhave little reason - in the long run - to reject the mechanical technologyif that meant giving up the productivity gain altogether. Even in theunfavorable closed economy scenario modeled in Column 5, the real wage ratebarely drops, and the food wage - the wage most relevant to the poorestgroup - rises substantially on account of falling agricultural prices. Inthis long-run full employment model, agricultural workers find employmentin the nonagricultural sector. Any difficulties arising from reducedagricultural employment are short and medium-run difficulties: increasedagricultural unemployment and rural-urban migration.

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Table 1: Imect of ALternative Technical IrKhvations on glitcuLture in an FE22MC!t-&i~ Setting: Japa, 1930

Open Econaiy - ELstic Final 0mrd CLosed EccxKxr-Irmtic Final D0uwi

(1) (2) (3) (4) (5) (6)Nutrai Inproved Shift from Neutral Inroved Shift froTechwiono Mechanical Neutral to Tedcn,Iag MechiwdcaL Neutral toIWrovement Tectd logy Medical Iaprov t Technology Mechnical

(% increase in aotput, eploymnt, w- rate etc. in response to a1% increase in agriacltural proctivity) c/

Agricultural Output 3.13 2.45 .68 .72 .62 -.10Agrioultural Eaployut 2.66 1.61 1.05 -.35 -. 68 -. 33

Real We Rate a/ .47 .20 -.27 .15 -.04 -.19Food Wae b/ .47 .20 -.27 1.07 .66 -.41ReaL AgrlaLtural Wage Bill a/ 3.13 1.81 -1.32 -.20 -.72 -.52Fann Profits (Land Rent) a/ 3.13 3.45 .32 -.20 .92 1.12Capital Rental Rate a/ -1.09 -. 48 .61 .35 .62 .27Real Wae Rate/Farm Profits -2.66 -3.25 -.59 +.35 -.96 -1.31

a/ Deflated by an econom-wide (NP deflator.b/ Deflated by the chae in agrlcultural prices.ci he re±lits apply either as static resporses to a static chage in agriciltural prodwctivity, or as

chnge in dynaic trmds.

Source: Ctmputed fran Bintwsnger 1980, Tables 4 and 5.

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adjustments are made some welfare protection of displaced workersand their families may be necessary.

o Relative income distribution effects are easier to predict thanthe absolute income effects just discussed. Farm owners willbenefit more from mechanization than farm workers.

WHEN TECHNOLOGIES ARE MUTUALLY EXCLUSIVE

4.36 When choosing large scale technologies rather than cost-effectivesmall-scale ones, or when subsidizing labor-saving mechanical technologiesat the expense of equally or more efficient investment alternatives, thedistributional analysis is much simpler. As discussed before, If twoalternatives result in equal cost reductions or equal economic returns,choosing or subsidizing the more labor-saving one must always reduce labordemand and labor welfare compared to choosing the other. This conclusionholds even when all general equilibrium effects are considered. In Table 1of Box 8, columns (3) and (6) simulate the economic outcomes in terms ofsuch shifts among agricultural alternatives for a general equilibrium modelhased on Japan. Irrespective of final demand conditions all measures oflabor welfare decline. A later example from Thirsk's study covers the casewhen the resources used to subsidize mechanization are instead taken fromthe nonagricultuiral sector (Box 9 of Chapter 5). Again labor welfarefalls.

FARM SIZE EFFECTS AND SELF-EMPLOYMENT OPPORTUNITIES

4.37 Where the most cost-effective machine size is bigger than theoptimum for existing average farm sizes, in the long run farm sizes willtend to adjust upwards. Larger farms will try to purchase or rentadditional land, thus reducing self-employment options for smallowner-operators or tenants. Such tendencies have been well documented, forexample in Pakistan. They can be mitigated in three ways: via the designof cost-effective smaller machines, via rental markets, or via landlegislation barring the acquisition of additional land. Each of theseinstruments offers opportunities, but also has its limitations.Engineering innovations aimed at reducing size seldom eliminate completelythe cost advantage of larger machines. Rental markets, as discussed, arehard to establish for sharply time-bound operations where timing conflictsare severe. And while the experience of the Indian Punjab shows that thepurchase of land can effectively be limited via land ceiling laws,additions to operated holdings via tenancy or reduced renting out willstill occur. More than other innovations, mechanical ones favor largerfarms. Where larger farms also have an advantage in access to credit, thisadvantage is further increased.

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38. Of course in an environment where non-farm opportunities arerapidly rising and the agricultural labor force tends to decline, theopportunity of increasing farm sizes via mechanization is central tokeeping rural incomes on a par with growing urban ones. For manydeveloping countries where the absolute agricultural labor force willcortinue to grow relative to the land resources, however, this is not theissue. In such environments, eliminating self-employment opportunitiesreduces opportunities for increasing incomes within the agriculturalsector. Whereas in the case of nonexclusive technologies or investmentsadverse effects may have to he accepted in order to achieve the benefits,in the case of mutually exclusive choices the story is simpler: choosingor promoting the technology with lesser economies of scale wll.l tend toimprove farm size distrtibution and social mobility, or affect them lessadversely.

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Chapter 5: BRINGING MECHANIZATION POLICY IN LINEWITH DEVELOPMENT OLJECTIVES

5.1 In this chapter we show that many developing countries pursue avariety of policies which -- while often internally inconsistent on balancetend to encourage high capital-labor ratios and accelerate mechanization.The policies pursued not only suffer from internal inconsistencies but areinconsistent with the economic and development objectives of these coun-tries. Once the policies are brought in line with these objectives mech-anization can be left largely to the commercial sector to promote, with asmaller role for government support than is the case with other componentsof agricultural advance, such as those associated with biologicaltechnologies.

EFFECTS OF MACHINERY SUBSIDIES

5.2 Subsidies can be justified if they promote the economic andsocial objectives of a country in cost-effective ways, such as improvingthe balance of payment, accelerating economic growth, reducingunemployment, poverty and malnutrition, or improving the distribution ofincomes. An alternative justification is to show that the subsidies offset-- in a cost-effective way -- the harmful effecte of other distortions inthe economy which cannot be removed. (Second-best considerations). Weshow that neither of these justifications applies to mechanization.

5.3 Subsidies for mecha;.ization almost always promote more labor-saving technologies at the expense of less labor-saving ones - the case ofmutually exclusive options discussed in Chapter 4. Any distortion in favorof agricultural mechanization implies the loss of an alternative investmentwhich is equally or more productive, and almost always less labor-savingthan the subsidized mechanical input. If the mechanical input were moreproductive than the alternative, a distortion would not be required tospeed up its adoption. Virtually all alternative investments within agri-culture use more labor. They include irrigation, fertilizers and landinvestments, all of which -- unlike many mechanical inputs -- havesubstantial direct output effects. Moreover, the alternatives may not bein agriculture at all but instead in the rural non-farm economy or in thenon-rural economy. A distortion in favor of agricultural mechanizationthus inevitably increases the adoption of a more labor-saving innovation oflower or equal productivity than the one it replaces. When the replacedinvestment is within agriculture itself, the results discussed in Chapter 4for mutually exclusive investments or technologies apply. Therefore,irrespective of final demand elasticies, and irrespective of generalequilibrium repercussions, a net subsidy will reduce economic efficiency,employment, real wages, food wages and/or the real wage bill below what

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they would have been in the absence of the subsidy. It will also typicallyincrease nit imports of fuels and machines and adversely affect smallfarmers relative to large ones.

5.4 When the replaced alternative investment is not in the agricul-tural sector, partial equilibrium analysis focusing on agriculture alone isparticularly deceptive. When the subsidy reduces private unit costssubstantially, it may -- under very elastic final demand -- result inexpansion of agricultural employment and rural labor welfare. However, thereduction of investment elsewhere in the economy implies a loss of employ-ment there. Thirsk analyzed this issue for the case of Colombia and theresults discussed in Box 9 are compelling. While the benefits of variousforms of mechanization depend on wage levels, the harmful effect of subsi-dies on wage incomes are not confined to low wage environments. The basicpoint, that in the long run subsidies to mechanization reduce employmentand self-employment opportunities and labor welfare below what they wouldhave been in their absence, is equally applicable to middle income coun-tries with rising wages as to low income countries with stagnant or fallingwages.

5.5 Distortions in favor of mechanization also are not reqtlred toget mechanization underway in the first place. Mechanization in thedeveloped countries did not depend on direct government intervention inmachinery development, technology choice, machinery manufacture, finance orpromotion. The most successful experiences in the developing world, rapidand widespread mechanization of milling, irrigation pumping harvestprocessing and transport, also did not depend on special interventions.Responses by private sector firms to more selected opportunities withtractorization have been equally rapid in developing countries as diverseas Thailand, India, Taiwan (China) and Mexico. The major farm machinerymultinationals have entered flexibly irnto a wide variety of arrangementsfor both export into developing countries and manufacture of farn. equipmentin these countries.

SECOND-BEST CONSIDERATIONS

5.6 Is there a case for mechanization subsidies to compensate farmersfor the adverse effects of other urban-biased policies common in developingcountries? Subsidized agricultural mechanization may indeed put back intothe rural sector resources which have been taken out by inefficientpolicies. However, such subsidies would compensate only the minority offarmers taking up machines, and would possibly make things worse for thebulk of farmers suffering under the other policies. Moreover, thesubsidies would further reduce employment in the sector, adding yet morepressure to urbanization. Is it possible that employment losses in agri-culture might be made up by employment expansion in machinery manLufacture,distribution and servicing? Obviously not, where machines are imported.Even where they are manufactured domestically, the evidence suggests thatemployment creation in machinery supply is much less than potential laborsaving in agriculture. Data from a few countries are presented in Table

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Box 9

The Impact of Subsidies for Mechanization in the Colombian Economy

Colombian agriculture is characterized by farm size dualism. Researchby Thirnk shows that prior to mechanization in 1951 there were widelydiffering land/labor ratios between large and small crop farms.

Constraints on factor use are prevalent in Colombia and account forthe persistence of the enormous disparity in factor proportions by farmsize. Institutional impediments to land mobility block the transfer ofland from larger to smaller farms either by sale or rental. There islittle credit available to small farmers for land purchase. Rental isoften precluded by landowners' fear of squatting and by current agrarianreform laws which view rented land as proof of inadequate use and, thus,more liable to expropriation than untended land. Moreover, largelandowners apparently prefer relatively unprofitable, extensive cattlegrazing rather than growing crops which would require larger amounts oflabor and more supervisory time. Prior to mechanization the result hasbeen the allocation of too much land to cattle production and an excesssupply of labor in the small farm sector.

In the late 1940s and early 1950s a significant growth inmechanization on large farms was stimulated both by a decline in therelative price of imported capital goods, and by a capital market subsidywhich made the cost of capital for large mechanizing farmers lower thanthat for nonagricultural users of capital.

In light of the factor market distortions, mechanization may appear tobe a promising second-best policy if the relevant policy choice werebetween accepting the status quo ante or fostering the expansion ofmechanized large-farm crop production. Resource allocation might improveas land on large farms was shifted from cattle to crops and as labor wasshifted from smaller to larger tarms. Unless final demand were priceinelastic, the overall demand for agricultural labor could be expected toincrease, and possibly some of the poorest groups in Colombia wouldbenefit.

In an attempt to examire the simultaneous interaction of as manyvariables as possible and avoid the constraints of partial equilibriumanalysis, Thirsk (1972, 1980) utilized a ganeral equilibrium approach inassessing this second best possibility. He assumed that if Colombia hadnot obtained inexpensive external loans for farm-specific capital inputs,it could have instead acquired foreign funds of comparable value toincrease the stock of non-agricultural capital. An aLternative assumptionis that domestic policies that encourage more imports of farm machineryentail less machinery imports in Lhe non-agricultural sector. Either way,farm subsidized mechanization deprives non-farm sectors of capitalresources.

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box 9 - Continuation

The model contains four sectors (cattle, large and small farm crops,nonagriculture), and four factors )labor, capital, mechanizable and non-mechanisable land). The repercussions of subsidizing mechanization in thelarge farm, crop sector are numerically simulated. Because crops are morelabor-intensive than cattle, the resulting shift in output on large farmsin favor of crops generates more large-farm employment. At the same time,however, the overall demand for labor in the whole economy declines becausemechanized crop growing is more capital intensive than the average non-agricultural sector. As a result, the small farm crop sector has to absorbmore labor and agricultural dualism is accentuated. These results hold fora wide range of parameter values. Thus, from a sectoral standpointmchanization is observed to be labor-using while from an economy-widepersgective it is 'abor-saving. A similar conclusion of aggregate labor-saving would be reached if it were assumed that the resources allocated tolarge-farm mechanization could have been used to rromote the adoption ofmodern bio-chemical technologies in the small farm sector.

Employment reactions are only one part of the process by which incomeredistribution occurs. Changes in the pattern of relative product andfactor prices are also important. In the labor market, employment oppor-tunities elsewhere in the economy could diminish for small farmers andlandless workers. In the product market, the expansion in the output ofLarge crop farm may reduce relative crop prices and turn the terms oftrade against small farmers. When interactions such as these and othersare considered by Thirsk (1972) he finds that mechanization subsidiesconfer real income gains on owners of capital at the expense of real incomelosses realized by workers and small farmers. Perhaps as much as threepercent of total income is transferred to owners of capital from the resLof the economy. Somewhere between 80 and 85 percent of this gain isachieved at the expense of labor incomes and the incomes of small-scalefarmers. The remainder of this income shift is borne by landowners.

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5.1. Logic also supports this view: if employment displaced from agricul-ture were fully replaced in machinery supply, where wages are typicallyhigher, then the total cost of production of agricultural output - includ-ing the total machinery cost - would rise rather than fall with mechaniza-tion.

5.7 Another second best and general equilibrium argument forsubsidies is made in the case of conversion of large ranches to cropproduction in 7atin America. This conversion may be blocked by obstaclesin land markets or political constraints which do not allow the option ofrenting, selling or distributing grazing land to small farmers who wouldput it into crops. In this case - the argument goes - a subsidy onmechanization might be a second best response to the land marketconstraints, and will induce ranchers to shift to crop production, expand-ing both output and employment in the large farm sector in the process.Such ranch conversion has indeed happened, as the earlier historical reviewsuggests. Thirsk's analysis of experience in Colombia, however, suggeststhat even in this case the employment and efficiency implications of thesubsidy were negative for the Colombian economy as a whole (Box 9).

5.8 Still another argument for subsidies occurs in the case ofpumpsets. This argument is also spurious because the farmers who invest inpumps can fully capture the benefits; no positive externality exists whichwould warrant a subsidy on effic-iency grounds. In fact, where f-rmersdrill wells into a common and limited aquifer, additional investment whichdepletes the aquifer imposes higher pumping costs on already existing usersand -- on eificiency grounds -- a tax rather than a subsidy might be calledfor. Nevertheless, can a subsidy be justified on equity grounds becauseadditional irrigation might create added employment? Under elastic finaldemand conditions the answer hinges on whether a subsidy on pumpsets ismore efficient in creating employment than alternative means such as publicworks or subsidizing labor intensive products elsewhere, for example in thehandloom sector. Where final demand is inelastic and the additional outputdepresses prices, employment generated on fields irrigated by subsidizedpumps may well be at the expense of employment on the upland fields wherecosts of production are not reduced.

5.9 A final second best situation arises when governments want toprovide infant industry protection to manufacturers. This may be done intwo ways. First, domestic machinery prices can be raised by import tariffsor (less desirably) quantitative import controls. In this case, as asecond best policy, governments may subsidize machinery to farmers in orderto iLnduce as much mechanization as would take place with undistorted pricesi.e. without the import tariffs or controls. A second approach to infantindustry protection, one which has been established as preferable, is togive strictly time-bound tax exemptions or lump sum grants directly to theindustry. In this case, because machinery prices remain at internationallevels, the need for subsidies to farmers disappears. The time-boundnature of the measures is less likely to encourage emergence of a high costindustry which is not internationally competitive.

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Table 5.1: Employment in Farm Machinery Industryin Four Countries (late 1970s)

('000)

India Pakistan Thailand Philippines

Employment In:

Manufacture 237 10 13 2

Distribution 123 3 4 15

Operation of Tractors a/ 300 42 33 15

Totals b/ 660 55 50 32

Value of Production (USSmillion) 453 24 99 36

a/ Assuming one operator for each large 4W tractor.

b/ These do not include persons employed in the repair, maintenance andservicing of farm machinery.

Sources: India: Manfred Sievers (1980, p. 81).Others: Acian Productivity Organization (1983, pp. 40, 43).

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5.10 In spite of the objections to subsidies just raised and otherdistortions, governments often adopr policies and programs designed tofoster and encourage mechanization. Very frequently the policies areinternally inconsistent, as when direct project interventions and an over-valued currency favor mechanization while the attendent foreign exchangerationing makes the importation of spare parts so difficult as to immobi-lize machines imported at great cost. Many times subsidies are implicit inpolicies adopted for reasons unrelated to mechanization. Sometimes theyare motivated by a desire to favor certain political groups, or by ideasabout "modernization." Prior to the successful reforms of 1969, forexample, a complex array of policies favoring mechanization were in forcein China. This special case is discussed in Box 10.

SUBSIDIZED AGRICULTURAL CREDIT

5.11 Providing credit for farm machinery, in particular for tractors,is highly attractive to banks since it allows large, discrete, medium orlong-term loans to be disbursed against items which are readily attachableas collateral.1 / Credit subsidies therefore would seem unnecessarv andredundant. Nevertheless, a virtually ubiqulitous form of subsidy foracquisition of machinery is the provision of agricultural credit at "easy"rates. Subsidized credit is highly advantageous to large farmers, andtends to end up in their hands because they are preferred customers, onrisk and collateral grounds, when credit has to be rationed. If creditwere freely available to all farmers who would use It, the distortiornswould be somewhat reduced, but with credit rationed, very often largermachines come to comprise a major outlet for investment lending by officialcredit institutions.

5.12 The World Bank has moved a substantial proportion of its fundsfor agriculture through credit projects. From FY72 to FY85, the Bank andIDA committed approximately US$ 9.3 billion for agricultural credit throughcredit projects and credit components of agricultural and rural developmentprojects. This represented just over one-quarter of all commitments foragriculture for the same period. During the past ten years the Bank hascommitted around US$ 700 million for financing farm equipment and machin-ery. About 50 percent of this has been through agricultural creditprojects. Analysis of 342 Bank-supported agricultural credit projects from1972 to 1984 shows the extent and persistence of negative real interestrates (Table 5.2). During this period 60 percent of the Bank/IDA fundsfor agricultural credit were on-lent at .egative real rates of interest,and a further 11 percent at positive rates less than 2 percent. The

1/ In Thailand, intense competition among tractor dealers offering creditreduced down-payments so much that tractor operators had an incentiveto "run them into the ground" and then allow the devalued machine tohe repossessed rather than repay the debt (Donovan 1984). The valueof machines as collateral became doubtful under these circumstances,but a vigorous reconditioning industry and second-hand market alsosprang up.

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Boz 10

Mechanization Policy in China

Since the early 1950s China pursued a policy of rapid mechanization,which was often viewed as a means of promoting collective fors of farm-ing. As a result of this policy China today has a very high level ofmechanization relative to countries in the same income group, such asIndia. In 1980, the total horsepower per thousand hectares in China was140 while India was at 75, barely more than half the level of China.

The early emphasis of the central government was on large tractors andharvest combines provided through tractor and machinery hire stations.These public fleet management schemes ran into the same problems thatpublic machine hire stations experience elsewhere in the world, i.e.,uncertainty about timely tractor supply; high administrative costs (thestations employed an average of 2.6 workers per tractor); and high rates ofmachinery breakdown due to improper maintenance.

Towards the late 1960s and early 1970s, decisions on the type ofmachines to buy and use were increasingly decentralized to the communes.Communes emphasized the selective use of large tractors for power intensiveoperitions such as plowing and transport. The other operations continuedto be done by human labor and animal power. The continued use and growthof draft animal numbers attests to this. Sharply increased emphasis wasplaced on the use of power tillers (two wheel tractors) and small tractorsfor rice cultivation. The number of power tillers rose from 4,000 in 1965to almost 2 millio.a in 1980, at an average annual growth rate of 51%, whiletractors in the same period grew at a rate of 17Z pa.

The selective use of machinery for power intensive operations is alsoemphasized by the communes' refusal to accept other technologies thatresulted trom government R & D efforts that were not directly related tothese operations. The case of the rice transplanter illustrates thisattitude. The first successful rice transplanter was reported in April1956 by the Central China Agricultural Research Institute, and by 1960 twomillion of them were manufactured for wide distribution. Very few of themwere accepted and used on commune fields (Stavis, 1974).

The biggest change in the patterns of agricultural mechanization cameabout in 1980 when individual incentives for production were improvedthrough the household responsibility system. Under this system the produc-tion team contracts out its farm resources, including land to individualhouseholds. These households turn over an agreed output to the teammanagement and are free to market the remaining output themselves. By1983, 94% of households in China operated under the household responsbilitysystem (Lin, 1985). The mangement of the machinery stock was increasinglyturned over to specialized households on an own-account basis. Householdscan also purchase smaller machines on their own account.

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Box 10 - Continuation

Between 1979 and 1983 these developments have resulted in dramaticchanges. The area plowed by 4-wheel tractors declined by 20% as tractorswere increasingly shifted to transport operations. At the same time, thenumber of draft animals increased by 22%, power t'ilers grew by 64% andchemical fertilizer use increased by 532. The number of motorized ricetransplanters dropped sharply (Appendix 2, Table 3).

The household responsibility system brought about an enormous growthin output and with it an increased demand for power. This demand has beenmet by a mix of power tlillers, draft animals and labor which farmersapparently find to be more cost-effective than relying on heavy tractors.

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Table 5.2: Real interest Rates tn 8ank/IDA Suipported Agricultural Credit Projects (3972-3984)Percentage of Credit a/ At Each Real Interest Rate

---- --- ---- FrY72-8 -- - - --8

Total Ag.Real Interest Rates a/ X of No. of Credit

(!) _ FY72 FY7

3 FY74 FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 Credit Project (U3$ *illions)b/

-80 to -1( 0 2 59 18 6 34 12 5 26 17 28 32 1 19 66 1,551--10 to - 0 Ii 96 30 33 71 19 42 52 56 65 9 27 21 41 137 3,326n to ? 1) 0i 10 0 0 6 9 24 I6 14 9 6 41 11 35 920

2 to 4 SS I 1 22 3 37 16 19 0 2 60 6 29 18 40 1,4054 to 6 17 1 0 27 5 2 2 0 - 2 0 6 7 4 27 3476 to A - 0 0 in 2 2 0 0 - 1 23 1 4 23 316R to I Q 0 0 0 17 - 0 9 0 0 0 2 5 158over In I 0 5 ( n 2 0 2 0 0 1 9 51

T< t ats (t ) 1f00 I (I) 100 10O 100 10 i1o 100 100 100 100 100 100 100 342 8.074

Total Ag. Credit b/( TSS atiIlons) 182.4 371.7 226.( 472.4 347.4 721.9 947.6 387.9 877.0 1,207.7 661.6 941.7 727.9 8,073.2

2 At ponitive

Real Interest FQ 2 11 49 23 47 46 43 18 18 63 41 78 40

a' Calr,,lated hv computing the average of highest and lowest Interest rates specified for project lending (1. and the tnflaton rate inthe calendar year of fiscal year of project approval (r), using the formula:

1I + I

Real Tnterest Rate - I + r -

b: Total World Rank/IDA funda allocated for agricultural credit in the projects.

indicates less than 0.57.

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proportion at negative interest rates varies between years but there is noapparent trend.2/

13. That interest rates in agricultural credit projects whichincluded farm machinery have also been generally negative in real terms isevident from Table 5.3, which reviews 20 projects in 14 countries supportedby the Bank in the past decade. This implies that at least one-third ofthe farm machinery investments in all Bank-supported agricultural projectsof the past decade have been made with credit whose interest rates werenegative in real terms. This has also been the case in countries outsidethis review. In Brazil, for example, real interest rates on farm tractorloans ranged from minus 4 percent to minus 42 percent during the 1960s(Thirsk, 1985). While these credit subsidies must be seen in the contextof all policies adopted by the counties, others of which will be discussedbelow, it is also apparent that a substantial proportion of the importedfarm machinery involved in these credits was further subsidized throughdomestic currencies overvalued at exchange rates used in the transitetions.The Bank has tried persistently to raise interest rates in the projects ithas supported, and has generally been successful in doing so in smaliincrements. Over the past 13 years, however, on averege only 4(0 percent ofall Bank/lDA funds for agricultural credit were on-lent at interest ratespositive in real terms, and the record Is characterized by considerableyear-to-year variations.

5.4 Overvalued Domestic Currencies

14. Almost as ubiquitous as subsidized credit are overvaltued exchangerates or, more accuratelv, overvalued local currencies, where too few units

of the domestic currency are needed to purchase a unit of foreign currency(Tables 5.4 and 5.5). Since the exchange rate is a pervasive mechanismwith profound effects on the level of economic activity and the dlistribu-tion of income among various groups, discussing its effect on farmmechanization is to focus on only a very small proportion of Itsinfluence. For example, an overvalued currency understates the value oftradable commodities (potential exports and imports) relative to non-tradable ones. Because a large proportion of agricultural output istradable, overvaluation typ.cally reduces the profitability of agricultureas a whole, thus reducing incentives to invest in agriculture -- whether inthe form of land improvements, a'imals and buildings or machienes. Reducedprofitability also accelerates the migration of workers from the sector.But in addition to these general effects, overvaluation distorts the choiceof technology in favor of techniques which use tradable inputs, rather thannon-tradable labor: imported machines, fertilizers and pesticides. The

promotion of mechanical technologies further reduces agricultural employ-ment. However, overvalued currencies can usually be maintained only viasome form of rationing. Only where the government makes rationed foreign

2/ A review of project completion reports and of OED rep(orts wasundertaken but these reports include little discussion of themechanization components of the projects and virtuallY no dl,ciscussionof mechanization policy.

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Table 5.3: Selected AgricilItural Credit Projects With Mechanization Components

Total Farm Bank Range ofProlect Machinerv Bank/ Financed Interest FY FY+1Cost Cost IDA Ag. Credit Rates Tnfl.c/ Infl.

Countrv _ Pro ect FY (tss.) (DS$m) (USsm) (US$m) (X) (X) (Z)

Turkev Corum-Cankiri Rural Dev. 75 161.6 27.4 75.D 30.0 10.5 19.2 17.3Mexico Agrtc. & Livestock 11 76 413.0 76.0 125.0 116.0 7.6-14.5 15.8 29.0Philippines Agricultural Credit IV 77 91.3 50.7 36.5 35.6 10.0-14.0 7.9 7.5Kenya Agricultural Credit III 77 40.0 6.2 25.0 19.5 10.0 12.7 12.6Chile Livestock, Fruit, Vitieyards 77 62.5 14.3 25.0 25.0 6.0-8.0 91.9 40.1Colombia Agricultural Credit ll 77 174.1 55.6 64.0 64.r 15.0-18.0 33.1 17.8Morocco Agricultural Credit III 77 315.3 55.4 35.0 35.0 6.5-7.7 12.6 9.8Argentina Agricultural Credit 78 161.7 26.0 60.0 54.2 6.0 a/ 175.5 159.5Mexico Agricultural Credit VI 78 627.2 115.0 200.0 192.8 11.0-17.0 17.5 18.2Egypt Sohag/Minuflya Agric. Dev. 78 46.0 18.' 32.0 24.5 9.0-1n.0 11.1 9.9

Morocco CNCA IV 79 737.2 141.1 70.' 65.5 7.0-8.5 8.4 9.4uirugtuay Agricultural Development 80 111.0 22.4 24.0 19.6 3.0-5.0 b/ 63.5 34.1Tunisia Agricultural Credit III 80 60.8 24.0 30.0 30.0 6.0-8.0 10.0 8.9Pakistan Agricultural Credit IV 80 224.6 151.2 30.0 30.0 11.0 8.3 11.7India AROC [II 80 1,005.0 102.2 250.0 248.7 9.5-10.5 11.4 13.0India ARDC IV 82 2,086.0 352.4 350.0 346.0 10.3-12.5 7.9 11.8Romania Moldova Agric. Credit 82 290.2 126.3 95.0 95.0 2.0-4.0 16.9 5.2Turkev Agricultural Credit 11 83 363.5 32.6 150.4 144.5 20.0-22.0 29.1 59.1 ODPakistani ADBP V 83 661.0 307.0 57.8 55.4 11.0 7.4 7.1Morocco CNCA V 84 602.2 111.1 115.4 110.0 7.n-13.0 12.4

8,234.2 1,815.6 1,850.1 1,741.3

a Loan principal indexed according to Wholesale Price Tndex.

b Loan prtticipal indexed accordi-, to producer prices.

i ncrease tn Consumer Price Index in calendar year of fiscal vear of the project.

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Table 5.4: Ratio of Parallel Market Exchange Rateto Official Exchange Rate

1965-70 a/ 1970-75 1975-80 1980-83

AsiaIndonesia 1.18 1.02 1.20 1.02Thailand 1.00 1.00 1.00 1.00India 1.56 1.37 1.15 1.18Philippines 1.11 1.27 1.06 1.13

AfricaTanzania 1.22 1.87 2.23 3.28Nigeria - 1.06 1.67 1.75Ethiopia 1.18 1.24 1.94 1.52Ghana 2.09 1.47 6.00 15.45Kenya - 1.52 1.11 1.22Sudan 1.53 1.73 1.76 1.70

Middle East andNorth Africa

Egypt 2.05 1.82 1.60 1.32Turkey 1.44 1.07 1.17 1.13Morocco 1.13 1.05 1.07 1.06

Latin AmericaEcuador 1.18 1.09 1.09 1.59Mexico 1.00 1.00 1.00 1.30Bolivia 1.14 1.32 1.08 3.02Brazil 1.09 1.17 1.20 1.50Chile 1.41 2.02 1.07 1.23Argentina - 1.75 1.05 1.46El Salvador 1.12 1.18 1.26 2.02Peru 1.15 1.63 1.11 1.04

a/ 1967-70 for Indonesia.

Sources: International Financial Statistics and World Currency Yearbook,1976, 1985.

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Table 5.5: Currency Realignments in Selected Developing Countries

Nominal Exchange Rates/Before After Nominal

Year Country Devaluationb/ DevaluationC/ Devaluation (%)

1965 Colombia 9.00 15.60 73.3

1966 India 4.76 7.50 57.6

Argentina 1.90 3.50 84.2

1967 Peru 26.80 38.70 44.3

1970 Philippines 3.90 6.69 7].5

1971 Argentina 4.10 8.90 117.1

1972 Pakistan 4.76 9.90 108.0

1976 Mexico 12.50 22.80 82.4

1978 Indonesia 415.00 628.30 51.4

1979 Egypt 0.391 0.700 78.9

1981 Nigeria 0.605 0.745d/ 23.1

a/ Domestic currency units to one U.S. dollar.

b/ Quarter before devaluation.

c/ Eight quarters after devaluation.

d/ End 1983.

Source: Edwards [1984, Table 6 (p. 141)].

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exchange available to machinery importers does a subsidy to mechanizationexist. If the exchange allocation is insufficient to meet farmers demandfor machines at the subsidized rate, farmers will compete for the foreignexchange. Depending on the rationing mechanism used by governments, thebenefit of the subsidized foreign exchange will then accrue to the luckyrecipient farmers, usually the larger and better off ones; or where farmercompetition leads to a black market markup on imported machines, thebenefits go to the importers, or even the foreign suppliers.

5.15 That overvalued exchange ratee can result in vastly differentoutcomes in terms of machinery prices is exemplified in Table 5.6. Braziland Nigeria both have overvalued exchange rates, but Brazil is a producerof tractors and has fairly low tractor prices. Domestic competition amongmanufacturers holds prices down. Nigeria and Tanzania, on the other hand,pay substantially more to foreign manufacturers for importing the machinesthan most other countries, and their domestic distribution costs andmarketing margins are also nearly the highest in the world. Clearly, thereduction in competition which repu'lts from exchange controls reduces theability of these countries to exploit competition among suppliers ofmachines as well as the ability of farmers to benefit from competitionamong importers. At the same time both countries have long subsidizedcredit for mechanical inputs and have public sector entities which providereduction in competition which results from exchange controls reduces theability of these countries to exploit competition among suppliers ofmachines as well as the ability of farmers to benefit from competitionamong importers. At the same Lime both countries have long subsidizedcredit for mechanical inputs and have public sector entities which providemachinery services to farmer3 to cleac land and plow it. Another extremeexample of the exchange rate problem occurred in Uganda. In the early1980s when the official exchange rate was Uganda Shillings 8/US$ whileparallel market rates were as high as USHs 220/US$, certain plantationcompanies with access to foreign exchange at official rates were purchasingtea picking machines because it was plivately profitable, even though handpicking was more cost effective from the standpoint of the economy as awhole (Hopcraft, 1986).

IMPORT TARRIFFS AND DUTIES

5.16 Tariffs and other ad valorem taxes also generally favoragricultural machines. As shown in Table 5.7 for a sample of 12 countries,the complete exemption of tractors from import dutiec and sales taxes iscommon and the highest taxacion rate is only 25%. This represents animplicit subsidy of farm machinery vis-a-vis other kinds of equipment, asindustrial machinery is often taxed at much higher rates. In Pakistan, forexample, ad valorem taxation of tractors is only 10% while for industrialmachinery it is 35%, and on trucks it is 75%, a clear policy inducement forusing tractors rather than trucks for transport purposes (FAO, 1984).

5.17 High tariffs on tractors have been confined to countriesattempting to build up their own tractor industries. With excess capacity

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Table 5.6: Tractor Prices in Selected Developing Countries, 1985

Retail CIF Markup and Ratio of Domestic Credit

US$/hp US$/hp Distribution Parallel to Official Production Import Negative RealExchange Rate or Assembly Duty Interest Rate

(19eO-83)

Turkey 130 - - 1.13 yes 0 yes

Pakistan 136 74 62 - yes 10% up to early 70s

Morocco 149 118 31 1.06 no 0 yes

Brazil 1,6 - - 1.50 yes - yes

Thailand 181 118 63 1.00 yes 10% no

Malaysia 192 147 45 1.12 no 0

Indonesia 198 119 79 1.02 no 20%

Sudan 200 140 60 1.70 no 0

Mexico 212 1.30 yes 0 yes

Egypt 212 145 67 1.32 yes 10% yes

Kenya 249 177 72 1.22 no 0 yes

Korea 281 - - 1.00? yes 10%

Nigeria 302 175 127 1.75 yes 15%

Cameroon 308 174 134 - no 0

Tanzania 317 184 133 3.28 yes 20%

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Table 5.7: Differential Duties on Tractorsand Spare Parts (1985)

Import Duty Import Duty onCountry on Tractors Tractor Parts

Pakistan 10 a/ 20Indonesia 20 t/ 30Malaysia 0 10Thailand 10 24Korea 10 C/ 30Morocco 0 50Kenya 0 54Sudan 0 54Nigeria 15 d/ 33Senegal 25 / 90Cameroon 0 56Turkey 0 6

a/ Defence surcharge 5%, Education surcharge 5%.

b/ 5% on CKD kits.

c/ Sales tax.

_/ CKD kits.

e/ Import duty 15%, Fiscal tax 10%.

Source: Agrisystems (1986).

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in the industry worldwide, it is likely that removing trade barriers ratherthan erecting them would be more appropriate. In India tractor importswere duty-free up to 1971, but were then subject to an import tariff of 30%in May 1971, which was raised to 40% in 1973, to be followed later by acomplete ban on imports (World Bank, 1979). This latter action followedstrong lobbying from a domestic tractor industry whose profits had fallenaway, partly because of price controls. In Argentina, similar bans onimports were used to protect the tractor industry so that the overvaluedexchange rate had no effect on domestic prices. But the protectedArgentine industry produced tractors at prices so much greater than worldprices that even exceedingly generous tax incentives (1956-65) and creditat negative real interest rates were not adequate to offset the importsubstitution "taxes." (Thirsk, 1985)

5.18 Favorable tariff and tax treatments often focus capriciously ontractor imports only, or perhaps on the import of other large scalemachinery. The most glaring inconsistency is the much higher taxation oftractor implements and spare parts. In every single one of the 12countries listed in Table 5.7, ad valorem taxes on tractor parts exceededthose on the tractors themselves. During the 1960s this anomaly wasextreme, for example, in Pakistan, where it led to a drying up of partsimports, and failure to keep the tractor fleet operating as fully aspossL:ble. When the World Bank drew attention to this in 1969, a pair oftractor tires was priced at RS 7,000, which was more than half the price ofa new tractor (World Bank, 1969). Pakistan later corrected this anomalyand parts are now taxed at a more moderate 20%, while the tractors aretaxed at 10%. Nevertheless, the singling out of tractors for favorabletreatment adversely affects the range of tractor implements from whichfarmers can choose and implicitly discriminates against animal draftimplements and hand tools. In Kenya for example, where tractors can beimported duty free, hand tools face an import tariff of 40%. Even thislevel of restriction has failed, however, to spur the development of adomestic hand tool industry as farmers still prefer the imported tools onquality grounds (World Bank, 1985). Of course, duties and tariffs oneither spare parts or whole machines may be legitimate instruments by whichto encourage growth of domestic industry, as long as they are kept underreview and either reduced or removed when there is danger of their freezingin place as inefticient, high-cost production.

MACHINERY SUBSIDIES

5.19 The implicit subsidization of machinery through overvaluedcurrency and 'easy' credit are much more common than are explicit, directsubsidies on machinery. Some examples of the latter do exist, however.One case is Morocco, where the government has for many years subaidizedfarm machinery at rates of 10%-50% for purchases by individuals and 20%-50%for those by cooperatives. The highest subsidies are reserved for smallequipment, while tractors are supported at 10% for individuals and 30% forcooperatives. For Morocco's 1981-85 plan the budget for such subsidies wasDH 105.5 million (US$10.6 million) (World Bank, 1986), which was probably

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about 62 of total subsldies for all agricultural inputs (dominated byfertilizer, animal feeds and irrigation water). The earliest Bank staffappraisal reports for agricultural credit projects in Morocco did notacknowledge these subsidies, though the projects contained financing for4,000 tractors and more than 700 combine harvesters. By the third projectthe estimated economic rate of return was adjusted to recognize theirexistence.

5.20 In India, the government provides subsidies up to 25%-33% toencourage small farmers (holdings less than 2 hectares) to adopt improvedsmall implements and machines -- a rare case of favoring small producersand small machines (Singh et. al., 1984). The subsidies on implementsand machines do not appear to be having their desired effect, however.This is perhaps because machine designs lack significant improvementsvalued by farmers, or because the low-quality and high-cost of manufacture,associated with the high-cost of materials in India (especially steel).Manufacturers would, allegedly, prefer that these latter problems be dealtwith and that the credit availab'lity for machinery purchase be improvedrather than have the subsidies continue (Singh, 1981). In India,subsidized electric power and diesel fuel have played a role in encouragingthe spread of motorized irrigation pumps. Additionally, direct subsidieswere often given for clearing land with bulldozers. Sometimes the clearingwas done by a government-owned enterprise. As discussed in Chapter 2 andespecially in Boxes 1 and 5, such subsidies cannot accelerate the pace ofagricultural mechanization and damage land resources.

5.21 In developed countries implicit subsidies to mechanization viathe income tax code are common, through accelerated depreciation ofmachinery used as a tax shelter. Since many developing countries do nottax agricultural incomes, these types of distnrtions are not common there.Where they occur, however, as in Brazil, the implicit subsidies can beextremely large. In order to arrive at a taxable income, the costs ofmodern current inputs or investments can be subtracted from agriculturalincome in a multiple of two to six, with the highest multiple applying tomachines. This means that investments in livestock, buildings, machines(and even airplanes) may be depreciated completely in the first year anddepreciated many times over. Furthermore, if these investment allowancesexceed current income they may be carried forward to the following year.The distortion towards mechanized technology has adverse effects on thepoor who rely upon employment. The generous allowances can lead tovirtually all agricultural income escaping taxation (except by indirectmeans -- which can be significant). They also provide opportunities toshelter some non-agricultural income from taxation. Naturally, suchbenefits tend to be capitalized into the price of land, and since theyconfer greater gains on individuals (or companies) in higher tax brackets,farm sizes tend to increase and land accumulates in the hands of wealthiergroups.

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TRACTOR PRICES IN 1985: A CROSS-COUNTRY COMPARISON

5.22 A comparison of 1985 tractor prices in 16 countries sums up someof the ways in which exchange rates, tariffs and other factors affect thecosts to final users, making tractors much less expensive to buy in somecountries than in others 'Table 5.8). In terms of US dollars, withcurrency conversions at exchange rates used in import transactions, thecheapest tractors in the world today are in Turkey and Pakistan (US$130 andUS$136 per hp, respectively), while those sold in Nigeria, Cameroon andTanzania are among the most expensive (more than US$300 per hp). In Turkeya highly competitive domestic manufacturing industry, which producesvirtually all the tractors sold in the country, is characterized by lowlabor costs, overcapacity, and low dealer margins. Tractors imported intoPakistan as completely knocked down (CKD) kits are subject to reducedimport charges of around 10%, and are assembled in a competitive industrywith official control of markups. In addition, probably because of thehigh volume of its imports, Pakistan is able to obtain the kits init4allyfrom major international manufacturers at very favorable prices. It hassuccessfully exploited competition among suppliers to attair some of thelowest tractor prices in the world. By contrast, the lower-volume marketsof Nigeria, Cameroon and Tanzania receive imported tractors and kits atinitially much higher landed costs than those for Pakistan. To these areadded further duties and significantly higher distributors' markups whichraise prices at retail to between two and two- and-a-half times those inPakistan. In spite of this, overvaluation of local currencies suggeststhat in both Nigeria and Tanzania tractor prices in local currency shouldbe substantially higher than they actually are.

5.23 Because governments also intervene in markets for agriculturaloutputs, the prices of machinery expressed in anits of cereals commonlyproduced can give a different ranking than prices expressed in monetaryunits. In terms of cereal units, Korea has the cheapest tractors in theworld. While tractor prices in Korea are more than twice as high in dollarterms as in the lowest cost countries, Korean farmers receive prices fortheir cereals at between three and four times world levels. As a result,it required 16 tons of rice or 33 tons of wheat in 1985 to buy a 47 hptractor. In Egypt, oy contrast, some 89 tons of rice or 172 tons of wheatwere needed to buy a 65 hp tractor. Thus a tractor which cost less inmonetary terms in Egypt (US$212 per hp compared with US$281 per hp inKorea) required 4 times the amount of rice or wheat to purchase (farmgatecereal prices in Egypt are from 15% to 45% below world market levels forcomparable commodities). On the basis of both monetary costs and cerealunits, Morocco offers particularly cheap tractors to farmers (per hp:US$149, or 0.74 tons of maize or 0.88 tons of wheat). With a verycompetitive tractor market in which margins on imports are pared awayalmost to nothing, and cereals prices are held above world levels, farmersdo not need the additional incentive they receive through 10% subsidies ontractor purchases by individual farmers. Correction of the currencyovervaluation and removal of other distortions would raise tractor pricesto farmers substantially.

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Table 5.8: Tractor Prices per Horsepower (1985)

Retail Rice/HP Maize/HP Wheat/HP C.I.F. Retail/C.I.F.Country US$/HP (mt) (mt) (mt) US$/HP Price Ratio

Turkey 130 0.45 1.21 1.03 - -Pakistan 136 0.85 - 1.30 74 1.83Morocco 149 - 0.74 0.88 118 1.26Brazil 176 0.91 1.71 0.93 - -India 177 0.76 1.41 0.98 - -Thailand 181 1.76 1.97 - 118 1.54Malaysia 192 0.86 - - 147 1.30Indonesia 198 1.25 1.93 - 119 1.67Sudan 200 - - - 140 1.43Mexico 212 1.66 1.50 1.85 - -Egypt 212 1.37 1.92 2.65 145 1.46Kenya 249 - 2.28 1.58 177 1.40Korea 281 0.34 0.61 0.70 - -Nigeria 302 0.57 1.09 0.82 175 1.73Cameroon 308 0.85 2.13 - 174 1.78Tanzania 317 - 1.03 - 184 1.72

Sources: Agrisystems 1986; International Fertilizer Development Center; WorldBank reports.

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5.24 The Bank in the past has attempted to reduce distortionsassociated with credit programs and projects which included substantialmechanization components. Most of these attempts have focussed on raisinginterest rates and reducing inconsistencies in the tariff treatment andimport policies of machines, spare parts and implements. Neverthele3s,most of the Bank's operations in this area have resulted in imports ofmachinery at overvalued exchange rates and subsidized interest rates andthus have been inconsistent with both the equity and efficiency objectivesof the Bank. In the future a much tougher stance will be required. Loanswiti1 large mechanization components should be conditional on a review ofall policy instruments affecting mechanization and an elimination ofexplicit and implicit subsidtes and other policy inconsistencies.

EFFECTS OF LAND TENURE AND LABOR REGULATIONS

5.25 An early argument about why machines were introduced on largerfarms held that they were to overcome diseconomies of scale in handlinglarge labor forces (e.g. Robinson, 1956, who commented that "machines aremore docile than men"). There have been, however, few attempts to quantifythese so-called "non-wage costs". Many countries have enacted labor lawsand legislation regarding land rights and tenancy which can be expected toinfluence the pace of mechanization. Their impact will depend, of course,on how vigorously they are enforced. Minimum wage laws cr ceilings on landrents or crop shares -- which would accelerate mechanization -- arevirtually unenforceable in environments dominated by smallholder familyfarms. Few Indian States, for example, even attempt to implement theminimum wages on their books. In Indonesia, several provisions of thelabor laws tended to convert labor from a variable to a fixed cost, makingit more attractive to use machines. Nevertheless, these had their effectsmainly outside of agriculture, although they might affect rice mills inrural areas and the technology used therein (Timmer 1975). Even in areaswhere unions had been strong, such as Kerala State in India, wage rates hadbeen determined mostly by fluctuating demand and supply co- litions in thelabor market (Oommen 1971). There had been instances in t,ese areas,however, of violent resistance by unions to farm mechanization, includingthe forcible harvesting of farmers' grain fields to protest lack ofemployment, which may have dampened enthusiasm for mechanization.

5.26 On the other hand, labor and tenancy laws can have powerfuleffects on employment in plantation sectors or in the large scale farmingsector of Latin America. Some countr4 es, such as Brazil, ha. e a mixed bagof labor and land laws which at the same time (a) limit in kind payments toworkers; (b) set minimum wages well above market rates; (c) requireemployers to provide substantial and perhaps excessive non'?age benefits;(d) limit crop shares and fixed rent payments of tenants well below marketrates; and (e) make it almoet impossible to evict tenants from the land.Such regulations make it very unattractive for owners to maintain substan-tial numbers of sharecroppers, tenants or hired workers.

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5.27 The laws favor extensive ranching or highly mechanized cropproduction, with the use of nonresident or migrant labor only during peakharvesting seasons (de Janvry 1981). ilven if the regulations are onlysporadically enforced, the risks of continued farming with a permanentlabor force or with tenants are very large. While intending to protectpoor workers and tenants, the policy mix achieves perverse results,expecially if large farmers receive explicit or implicit input subsidies.

5.28 In a number of countries, land laws also regulate or limit thegrowth of farm sizes via purchase or even additional rental. Strict lawslimiting the accumulation of land in Japan and Korea are a disincentive tomechanization via large machines. Nevertheless, with the high output pricelevels prevailing in these countries, they did not prevent rapidmechanization by small scale machines. While they may have made moreorderly the outflux of labor from agriculture and preserved the very smallscale farms, the efficiency costs of this strategy are probably quitehigh. At the opposite extreme, labor policies iwplicit in the creation ofcommunes in China have encouraged a pattern of excessive large scalemechanization which has been abandoned with the successful economic reformsinitiated in 1979 (Box 10).

5.29 In Pakistan, growth in use of tractors was accompanied by bothincreases in farm size and eviction of tenants. The land reform legiqla-tion enacted in 1972 and 1977 imposed fairly large ceilings on ownershipho- ngs but these ceilings do not appear to have altered these effects(Lockwood et al., 1983). In India, on the other hand, there is littleevidence that tractors led to increased farm size, probably because landceiling legislation had been in place longer than in Pakistan, and waseffectively eliminating the land purchase option despite the fact thatlittle surplus" land was actually redistributed during the 1960s and 70s.

OTHER BIASES IN TECHNOLOGY CHOICE

5.30 Discussion of technology transfer would not be complete withoutmentioning the numerous factors which can bias the cho'ce of technique indeveloping countries, even in situations where some of the more gross macrodistortions mentioned above are not present to a marked degree. Thesebiases include:

o Preparation of projects on a sector-by-sector basis, by plannerswho see the availability of capital only for their own eectors orregions and not from the national point of view.

o Easier management of plans for, and control and eupervision of afew large, capital-intensive projects compared with many smalllabor-intensive ones.

O Greater possibilittes for illegal payoffs from capital-intensiveprojects, inducing bureaucrats to favor them.

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o Capital bias in aid-financed projects designed by specialistsfrom industrialized countries.

5.31 An example of the aplital bias of planners is provided by a ricemarketing study financed under bilateral aid in the early 1970s illIndonesia (Timmer et. al. 1975). Indonesia has a policy environment withfew blatant distortions -- favor of high capital-labor ratios. The basicinterest rates for secured loans from government banks were between 20% and30% p.a. and private banks charged more (all of these rates were aboveinflation); there was a free fereign exchange system with roughly correctpricing of currency; pressure of surplus labor had limited the power oflabor unions and kept down wages. All market signals should thus havefavored relatively small scale and low capital-labor ratios. But the teamof foreign consultants chosen for the study had recently done similar plan-ning exercises in Brazil, the Philippines and Bangladesh, and believed ithad a mandate from its foreign financier government to make similar propos-als in the new study. The Indonesian Steering Committee gave the teamstrong instructions that recommendations should be based on Indonesia'ssituation, especially the widespread availability of cheap, unskilledlabor. Economic analysis of technical options available clearly demon-strated the superiority of small rice husker/polisher units at marketprices, with larger integrated rice mills barely optimal even at highlydistorted prices, especially subsidized credit. The consultant team evencalculated a benefit-cost ratio of less than 0.5 for the bulk facilities itfinally recommended. In spite of this, the consultants recommended theunprofitable, larger, capital-intensive technologies because they believedit necessary to begin modernizing Indonesia's rice marketing system. Thisreflected "a deep-felt bias on the part of Western and Western-trainedtechnicians that identified capital-intensive with modern, and modern withgood". As it turned out, the Steering Committee rejected these initialrecommendations, instructing the study tearm to give credence to its owneconomic analysis. The final report presented various options with niorecommendation, leaving the Indonesian government to choose for itself infull knowledge of the costs and benefits of each alternative.

SHOULD GOVERNMENTS DISCRIMINATE AGAINST MECHANIZATION TO FURTHERPOVERTY ALLEVIATION AND EQUITY OBJECTIVES?

5.32 This question arises particularly in environments where abjectpoverty among workers jersist and where, as in India, Bangladesh, or thePhilippines, real rural wages have either stagnated or have fallen over thepast decade. To maximize growth, policy should aim at creating anenvironment as free of distortions as possible. Therefore, imposing a taxon a machine to slow down its adoption cannot be advocated as a generalpolicy measure. Instead, such a tax must be viewed as a welfare policyaimed at assisting poor workers who would be hurt by the introduction of amachine. Since the tax implies a loss for the economy as a whole, it mustbe compared to other more direct welfare measures for poor workers such asincome transfers. It will be a second-best policy if it protects the real

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incomes of the poor workers at a lower cost than alternative welfaremeasures. rTe machinery tax is more likely to be a cost-effective welfaremeasure, the higher the cost of reaching the poor workers v.a alternativepolicies, and the lower the economic cost of slowing down maLh'ineryadoption.

5.33 Direct means of providing displaced workers with additionalincome can be very costly because it is very difficult to target benefitsto the real losers. Even if it were possible to find all workers displacedby a harvest machine, for example, these workers may not be the reallosers. Many of these displaced workers will find jobs elsewhere,displacing others not initially affected. It is even possible thatunemployment would not increase, but that all poor workers, whether theywere employed in harvesting or not, would suffer from a real wage decline.Thus, finding the real losers is prohibitively costly. The advantage of amachinery tax is that it is self-targetting, i.e. it prevents or slows downthe initial round of labor-displacement. It is not necessary to know whowould ultimately have lost from the introduction of the machine. On theother hand, a scheme of direct compensation implies that additional taxesmust be raised which have a welfare cost of their own. Thus, compared toother welfare measures, the tax does indeed have a lower implementationcost.

5.34 However, what about the economic cost of not introducing themachine? The cost would be low where productivity gains from mechanizationas well as private cost savings are small, but where labor displacement isparticularly large. An example is the introduction of combine harvestersin South Asia. In a careful Rtudy, Laxminarayan et al. (1981) show that(a) the private cost reduction arising from the use of harvest combines forwheat and rice in the Indian Punj-b is very small; (b) the combines are notassociated with increases i1 cropping intensity, timeliness or farmproductivity; (c) the labo- displacement from introducing combines isespecially large: (harvest and threshing labor requirements are reduced by95% and widespread adopticn of the combines would reduce agriculturalemployment in the Punjab by approximately 170,000 person-years); (d) about40% of the replaced workers would be migrants frou the especially poorregion of Ncrthern Bihar; and (e) the main reason why farmers adopt themachine is to reduce labor management difficulties. A tax on harvestcombines would be an apprepriate distributional intervention because thecost reduction is minimal. Unlike the case of rice mills in Bangladesh,discussed in Box 11, adopting the harvest combines would at best lead tonegligible food price reductions and could not generate large offsettinggeneral equilibrium effects. The economic cost in terms of forgone growthwould therefore be small, while the income effect on poor workers would bequite large. The ultimate judgement whether or not to use a second besttaxation scheme to benefit poor workers is a value judgement which restswith governments and depends on their committment to poverty alleviation.

5.35 If a government decides to slow down the adoption of a specificmachine, why is a tax and/or an import tariff preferrable to simply banningthe machine? Taxation has several advantages over banning a technologysuch as the harvest combine. First, the benefits from a machine varyenormously among regions and farm types. A tax would still permit thosefarmers with the largest benefits to adopt the machine. This would alsopermit manufacturers to gain experience with the machines in the localenvironment. Thus, a certain amount of adaptation and learning-by-doing

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Bow I1

Poor Women and the Mechanization ofPost-Harvest Processing in Bangladesh

The rapid spread of small mechanized rice mills in Bangladesh hasresulted in the displacement of thousands of poor women from their tradi-tional source of employment in rice processing. The plight of these women,who are often single, divorced or widowed, is an emotional issue that hasbeen studied extensively. What are the efficiency and equity issues andwhat are the policy options for reducing the adverse employement impact onfemale labor of the growth in mechanical mills?

Traditional rice milling in Bangladesh is done by a foot operatedpestle and mortar known as a dheki which is usually owned by the largelandowne:s and operated on a contractual basis by women from landless andmow income households. The current village level alternative to a dheki isa small mechanical rice mill which is clearly more cost effective. Thecost-difference in milling between the dheki and the mechanical mill isabout 12:1, not counting the transport cost of bringing the rice to themill. This enables mill owners to charge very low rates for milling rela-tive to dheki operators.

Currently, over 40% of all rice milling in Bangladesh is mechanized.This is in sharp contrast to the almost exclusive use of the dheki in thelate 1960s (Scott and Carr, 1985). The rapid spread of mechanized millinghas benefited large landowning households, subsistence farming householdsand urban consumers, including the urban poor whose rice prices arereduced. Female members of large surplus farms have more leisure timesince they no longer have to supervise hired dheki operators and theirfamilies have benefited ecnomically by displacing dheki wage labor withcheaper mii Ling costs. Female members of subsistence farms who previouslyoperated the dheki for their home consumption are relieved from time-consuming and physically demanding labor. On the other hand, wage-laborwomen from landless families have suffered as a result of the mills becauseof the absence of alternative remunerative employment.

Women in Bangladesh have to live and work within a system of seclusionknown as Furdah. Rice processing accounts for 50X of all income earningopportunities available to women from landless families since it can beaccomplished within the restrictions imposed by the purdah system (Cainet. al., 1979). With an estimated 10,000 rice mills in rural areas,between 1.4-2.0 million women have already lost a traditional source ofpart time employment. With approximately 700 mills per annum established,an estimated 100,000-140,000 women are being displaced each year.

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Box 11 - Continuation

Because cost reduction is so massive and because poor urban and smallfarmer groups gain, it would be inappropriate to slow down the expansion ofthe mills by policy measures much as the taxes discussed in section 4.10.Are there any other policy options for dealing with the plight of thesewomen? Several different training schemes have been started for helpingwomen obtain alternative employment as handicraft makers, bank workers,water pump operators, etc. These projects help a number of women whousually have difficulties obtaining training. The governisent also set up ascheme by which a group of women who were formerly dheki operators couldobtain a loan for setting up and operating a rice mill. Since women havegreat difficulty obtaining loans from traditional and even officiallenders, the scheme enables those who have some organizational ability toparticipate in the economy as entrepreneurs. Both the training programsand the credit program can benefit only a small number of women and arehard to target to the poorest among them who are displaced from ricemillling.

In addition to the above, attempts have been made to employ thedisplaced women in rural public works programs such as canal and ponddigging, road building, etc. Income from this activity is usually tempo-rary and often requires several hours of travel betwe n the home and theproject site, thus affecting home production activities of the women.

The solutions discussed so far are partial remedie3. Their limitedscale and the inherent difficulty of reaching the poorest victims implythat they cannot adequately compensate most of the displaced dhekiworkers. The long term solution is social change in the restriction ofwomen's movement, which would expand their employment opportunities. Theprograms discussed sr, far are likely to accelerate such social change. Butmuch of the change will have to come from within the society. Prior to, orin the absence of social change, some form of direct income transfer topoor women will have to be found, since some of them and their children maybe at severe nutritional risk as a result of technical change which isdesirable on overall economic grounds. Since such a social welfare measurewould have to be of a long term character, the poverty level of the house-holds, rather than previous employment in rice milling, would have to beused as an eligibility criterion.

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would occur. Moreover, as we have seen, it is difficult to quantifyaccurately the benefits of individual machines. If these benefits werehigher than estimated initially, adoption would still proceed desp''e thetax, indicating that the machine is more productive than anticipated.Under a ban this information would not become available as readily. Bansare not, therefore, recommended.

TO SUMMARIZE

5.36 The key elements of the policy stance of this chapter and ofChapter 3 are as follows:

o There are many ways in which the various benefits ofmechanization discussed in this report can contribute toagricultural and economic growth. Some of the benefits, suchas yield gains, have often been exaggerated in the past whileothers, such as potentially lower food prices arising fromlowez production costs, h.ve largely been ignored. It: is alsoclear that when the intensity of cropping of land rises, moremechanical energy and more timeliness are required. Butmechani2dl energy and timel!nesE can be provided in a widevariety of ways, and the most cost effective combination oftendoes not include using the most advanced machines or usingthem only for certain rperations.

o Most developing countries pursue policies which affect tilepace and pattern of mechanization in ways which are bothinconsistent internally and inconsistent with theirdevelopment objectives. Many of these policies are keenlydefended by interest groups that benefit from them. Thesegroups often advance second-best considerations in their favorwhich do not, however, stand up to close scrutiny. Bringingthese policies and Bank operations more in line with growthand poverty alleviation objectives will not be an easy task.

O Overvalued exchange rates and subsidized int?resc rates arcthe major distortions favoring exce3sive, casital-labor ratiosand grow'.h in farm size.

o Inconsistencies abound in the foreign exchange and tarifftreatment of small machines, implements, animal draft equip-ment, spare parts and fuels. These inconsistencies affectpatterns of mechanization unfavorably and reduce utilizationrates of tractors and other large-scale machinery.

O Well-meaning labor, land and tenancy legislation in manycountries undermine employment and self-employmentopportunities in agriculture by favoring large-scale machine-intensive farms. And in some more advanced countries, incometax laws convert machines into tax shelters.

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o Governments committed to poverty alleviation may under certaincircumstances, want to impose taxes on specific types ofmachines in order to slow down their adoption. Such policiescan be second-best approaches to protecting the welfare oFpoor workers where a machine leads to only modest economiccost reduction but where it displaces large numbers ofworkers. It is usually very costly, or impossible, tocompensate for the real losses from the introduction of amachine. If the machine does not reduce costs substantially,the taxes protect these workers at a low cost. Outright banson machines are not, however, advocated.

O Industrial policy conducive to local adaptation, productionand machine maintenance emphasizes the role of governmentinfrastructure in supporting education and training, inprotecting patent iights and in setting minimum industrialstandardR. It also stresses the openness of the economy toimported prototypes, components, parts and raw materials.Equal access of small and large firms to foreign exchange isequally important.

O When governments decide to provide infant industry protection,that protection is best provided by strictly time-bound, taxexemptions or grants in kind or cash. Tarriff protection,quantitive import controls and direct government participationin manufacturing or machinery design, however, are notrecommended.

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Chapter 6: LESSONS FOR SHE BANK

6.1 In general, Bank experience has shown that pursuit of growth andpoverty alleviation objectives via project interventions is not feasiblewhen government policies are inconsistent with these objectives, and thisapplies to mechanization as well. The beneficial effects of a ruraldevelopment project emphasizing small farmers and/or a poor region caneasily be offset if distortea mechanization policies encourage capital-intensive and large-scale farm units elsewhere in the economy. Suchdistortions undermine the competitive position of the small farmers or poorregions assisted by the project, and reduce employment/and self-employmentopportunities in agriculture. Even when a project specifically aims atproviding credit for farm machinery, policy inconsistencies such as thoseaffecting spare parts supplies may undermine the project's mechanizationgoals.

6.2 As part of its structural adjustment and agricultural sectorlending programs the Bank is already emphasizing the reduction of the mostprevalent implicit distortions affecting mechanization, subsidized interestrates and overvalued exchange rates. Policy conditionalities tend to focuson bringing exchange rates and interest rates into line with marketconditions. Reducing the biases against agriculture in output pricing andmarketing policies is also a frequent: objective of these loans. Theytherefore tend to provide improved incentives for all agriculturalinvestments, including cost-effective mechanization.

6.3 In past projects which have included substantial mechanizationcomponents the Bank has also persistently tried to reduce distortions.Most of these attempts have focussed on raising interest rates and reducingthe widely prevalent inconsistencies in the tariff treatment and importpolicies of machines, spare parts and implements. Nevertheless, many ofthe Bank's operations have resulted in imports of machinery at overvaluedexchange rates and subsidized interest rates and thus have beeninconsistent with both the equity and efficiency objectives of the Bank.The Bank has also on occasion supported public machine hire when under mostcircumstances rental markets will more effectively accomplish the sameobjectives.

6.4 In the future a much tougher stance will be required on theseissues. Loans with large mechanization components should be conditional ona review of policy instruments affecting mechanization and attempts shouldbe made to eliminate explicit and implicit subsidies and other policyinconsistencies. Every project with agricultural mechanization as asignificant component should be viewed as a critical opportunity to helpcreate a policy environment less at odds with a country's objectives andtrends in resource endowments. The elements of such a review and of thepolicy recommendations have been summarized in Chapter 1 and at the end ofChapter 5. Apart from eliminating inconsistencies in foreign exchange andtariff treatments and achieving positive real. interest rates, policies

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which require review include well-meaning labor, land, and tenancy laws aswell as tax policies, all of which may implicitly encourage large-scalecapital-intensive production.

6.5 Farmer choice is capable of finding cost-effective mechanizationpatterns, and private industry initiatives can successfully cope withadapting, developing and producing the required machines and implements.Therefore the scope for direct project intervention to promotemechanization is more limited than in other areas of agriculturaldevelopment where public initiatives are essential. In particular, demandsby governments to assist public machine hire stations should be stronglyresisted by initiating a dialogue on how to foster the emergence of orremove constraints on private rental markets. The Bank should alsodiscourage projects and policies which subsidize land clearing wiih largescale machinery. While large scale machines may sometimes be required toclear land, this is no reason to subsidize them. And where they are notrequired, subsidizing them may push land clearing into ecologically fragilezones and, compared to using less mechanized techniques, increases the riskof damaging soils.

6.6 One area where continued project interventions are worthwhile isanimal traction In those selected Sub-Saharan Africa environments which areready to shift from hand-hoes to the plow and where project support cansignificantly increase the adoption of this technology. The elements ofsuch projects are discussed in Chapter 3 and include blacksmith trainingand sometimes special arrangements for supplying and training animals.They also require improvements in access to credit and to veterinaryservices. In situations where animal draft has long been used and where itcan be expected to be a major source of power for several decades to come,projects in agricultural credit, research, and extension provideopportunities to reduce or eliminate biases against animal draft. And manyprojects provide opportunities to make sure that government policies do notadversely affect the availability and spread of improved hand tools, animaldraft equipments and small s^ale machinery. On-farm testing of equipmentalready used by farmers in other countries is often the best way of findingImproved equipment, rather than on-station design and development.

6.7 Assistance focusing on the development of a domestic machinerindustry is best based on the knowledge of existing incentives and/orimpediments which affect the different segments of the industry asdiscussed in Chapter 3. The first task is to remove biases in theallocation of foreign exchange and high quality raw materials againstsmall-scale local adaptation, production and repair whether it be for handtools, animal draft equipiaent or tractors and their implements. Inventorsand manufacturers must also be able to take advantage of patent protectionand have access to well-trained engineers. Where there are cleardeficiencies in the support of training in mechanical skills, in thecapabilities of the patent office, or in the machinery testing capabilityof the research system, specific technical assistance can be initiated bybilateral donors or as part of other Bank projecMs. Public sector research

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aimed at inventing and adopting machines has shown only very limitedsuccess in both the developed and the developing world. Research is betterfostered ink the private sector and the World Bank assisted projects whichimprove public sector agricultural research systems need not, therefore,include large agricultural engineering components. Finally, a review ofmechanization or machinery industry policy provides an opportunity tostrengthen the capacity of the Ministry of Agriculture and economicresearch institutions in evaluating these policiese

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Appendix I

Determinants of Recent Trends in Tractorization

This appendix briefly reports regression results on price andnon-price determinants of stocks of medium and large tractors in developingand developed countries. The dependent variable is simply the number ofmedium and large (four-wheel) tractors as reported by FAO. The pricedeterminants include output prices, fertilizer prices, and urban wagerates. Comparable rural wage rate data were not judged to be sufficientlyreliable, and changes in urban wages are assumed to be a better measure ofchanges in the opportunity cost of labor. Comparable tractor price data donot exist. While policy distortions which affect output prices are thusincluded in the analysis, those affecting tractor prices or interest ratesare not. Of course this does not mean that we judge these variables to beunimportant. The non-price factors attempt to measure government supportto, and investments in rural areas: irrigation, road investment,education, health, agricultural research and extension. Some of thesevariables are difficult to measure and only crude proxy variables areavailable. Other variables reflect the general economic environment:rural population density as a measure of labor availability, and GNP percapita as a measure of general capital availability or wealth. A detaileddiscussion of the variables, the measurement difficulties and theestimation methods used is given in Binswanger et al. (1985).

While some of the variable measurements are crude, it should benoted that the regression results relate the growth of the determinants tothe growth of the tractor stocks. Differences in the agroclimate or in themeasurement of variables across countries therefore do not affect theresults, as long as these inter-country differences remain fixed. Inparticular the fact that some countries use smaller tractors than othershas no impact on the result, except where the composition of tractor stockchanges sharply over time. While in the real world the factors affectingtractorization varv simultaneously, the multi-variate statistical analysisattempts to measure the impact of changing a single variable (e.g. wagerate) while holding constant all other variables (e.g. road infrasLructure,or GDP per capita). The statistical results thus give a gross indicationof the order of magnitude by which the tractor stock would change if asingle variable were altered by a policy intervention. Of course thesestatistical results hide a lot of local variability.

These regressions (Appendix Table 1) bear out what is apparentfrom other data and our discussion of the increased power demand associatedwith agricultural intensification. Irrigable area, one of the maindeterminants of cropping intensity in the tropics, has a highly significantcoefficient. A one percent increase in irrigable area appears to increasetractor demand by over 3%. This means not only that irrigation increasesthe demand for power, but also that tractors, rather than other sources,have often been a privately cost-effective way of meeting that demand. In

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the developed world, which was heavily mechanized before the period ofanalysis, and where irrigation is often used to supplement crop waterrequirements during the main growing season, additional irrigation has amuch more modest influence on tractor demand, with an elasticity of only0.3.

In both regions of the world, increases in per capita incomestend tc increase tractor mechanization, with an elasticity of around 0.4.Per capita income can be interpreted in several ways, but perhaps the mostnatural interpretation is one of increased capital availability. Thusmechanization seems to be closely asbociated with increases in the capitalintensity of the economy as a whole. Road investments have been measuredin two ways. A simple extension of roads, irrespective of their quality,is measured by the variable for road density. In the developing world suchsimple extension still provides an impetus to tractorization, but not inthe developed world. Improvements in road quality, as measured by thepercentage of road paved, appear to add to the usefulness of tractors inboth the developing and the developed world.

Improvements in health, as measured by life expectancy, also arestrongly correlated with tractor investments. Hiowever, general educationalinvestments appear to have little influence, perhaps because tractor ownerstypically belong to social classes with privileged access to education.Increase in aggregate output prices do not appear to accelerate tractorinvestment in the developing world in the short run, blt have a smallinfluence in the developed world. This does not mean, of course, thatoutput prices are unimportant in the long run. The supply response studyfrom which these findings come suggests that long run olasticities withrespect to price cannot be estimated with this data set. Rising fertilizerprices reduce tractor investment 'n the developing world, pel'aps becausethey compete for scarce finance. By contrast, they have little 'nfluenceon tractor stocks in the developed world.

In the developing world, increased availability of labor, orred iced availability of land -- as measured crudely by rising ruralpopulation densities -- tends to slow down tractorization. A 10% rise inpopulation density, holding constant the level of irrigation and otherinfrastructure variables, would reduce tractor demand by between 3% and5%. Because the regressions already include irrigatlion, one of the maindeterminants of cropping intensity, the effect of population density oncropping intensity has already been accounted for. The coefficient of thepopulation variable is therefore net of its effect on intensity. In thedeveloped world, increasing rural population density appears to have muchless of a dampening effect on tractor demand. On the other hand, wages,measured by urban wages rather than by the very spotty rural wage data --are less important in developing countries than in developed countries. A10% rise in urban wages increases tractorization by between 2.5 and 6% inthe developed world, but only by about 1% in the developing world. This isbecause at the wage levels of most developing countries tractors are usedprimarily for power intensive operations where, as we have ar7ued In themain report, wages are not the primary determinant of tractor use,

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Avu dlxTaL 1: Ntea 1tsm of Stocks of MhdiLum ard ilsze Tractors * 1%8-79

A. Devloping Cazntries B. DleQloped CamtrleB-(37 cntries) - (21 c;tries)

VARIANZS Vuucim 1 Version 2 Version 1 Version 2

1. Aregtoe OXlaitPrice I/ 0.03 -0.05 0.05** 0.10**

2. FertilIzer Pri -0.09** -0.06 0.00 0.02*

3. Urbsi tIUe Rote 0.05 0.16** 0.58** 0.250*

4. Per Capita Inc OO** - 0.36**

5. Ti - 0.015** - -06**

6. Riral PopulaionOeruity -0.55** -0.31** i.30** 1.11**

7. Irrigation (percom ofcrp rea irrigted) 1/ 14.0* 14.25** 2.56** 3.01**

8. RcPad lmrity 0.13 * 0.17** -0.21** -0.13**

9. Percentage of roedspaved 0.32** 0.34** 0.22** 0.27**

10. Adult literacy rate 0.0 0.0 -0.04** -0.03**

11. Life Expectsacyin years 1, 4.24** 4.38** 9.32** 9.8*

12. Agricultural Resenrchscientist mryars -0.13** -0.08** -0.70** -O.OB**

13. Agricultural Extrdion -0.03 -0.02 0.31** 0.39**

Statistical Rark 7 7 4 5

R-Square 0.69 0.66 0.73 0.63

*Significant at the 5% levelL**Significant at the 1% leIe.

Note: With the exception of life eopectancy and irrigation the coefficients in theregression are elasticitis with rspt to the variables. For tife exectancy, thecoefficient reflects the percwtap increase in tractor stocks for every year ofadditional life exectanry. For irrigation it reflects the percenLage impact on thetractor stock of increauing the peroentaq3 of area under itrigation by one percent. Thedata are first trauforind to differuicas from neans, i.e. a "within" estimator is used,which cvrrespond to a fimd ffects nodel. The regressions are fitted using 4njdlak'sprinciple conponet tedvll4m.

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Appendix II

TABLE 1 PATTERN OF AGRICULTURAL MECHANIZATION IN JAPAN(thousands)

DraftNumber and Power Riceof beef Combines/ Rice sprayers,Culti- Power Riding Trans-

Year farms cattle Horses Motors Pumps Threshers Hullers dusters vators Tillers Tractors Binders planters

1880 5,500 1.152 1.626 n.a. n.a n.a. n.a. n.a. n. n.a_ r..a. n.a. n.a.1900 5.502 1.204 1,542 n-a. n.a n.a. n a. na. n a. n.a. n.a- n.a. n.a.1910 5,518 1,259 1.564 n a. n a n.a. n.a. n.a n.a. n.a n.a. n.a. n.a.1920 5.564 1.256 1,468 2 2 0.5 0.6 n.a n a. n.a. na. n.a. n.a.1931 5,632 1,361 1.477 92 28 56 77 0.2 n.a. n.a. n.a. n.a. na.1939 5,492 1,767 1.168 293 83 211 132 5 3 3 n.a. n.a. n.a.1945 5.670 1.827 1,049 424 87 364 177 7 8 7 n.a. n.a. n.a.1951 6.145 a 1.112 1.295 92 1.080 460 20 29 16 n.a. n.a. n.a.1955 6,027 n.a. 888 2,140 122 2.060 700 87 82 82 n.a. n.a. n.a.1960 5,966 n.ae 61F 2,799 288 2.651 878 305 791 514 n.a. n.a. n.a.1966 5,665b n.a 396c 3,108b n.a 3,172 1,008b 1,126 n.a. 2,725 39 146 n a.1971 5.342b n.a n.a. n.a. n.a n.a n.a 2,400 n.a. 3,201 267 582 461976 4,835b n.a. n.a. n.a. n a n.a n.a. 2,898 n a. 3,183 721 1.498 1,0461979 4.742 n.a 25 n.a. n.a. 747 n.a 2.618 n a. 3,168 1,096 1,704 1,6011980 4.661 n.a 22 n a n a na n a. n.a n. n.a na.e n.a. n.a.19l1 4.614 n.a 23 n.a. n a 916 n.a. 3.364 n.a. 2,812 1,413 1,683 1,8871982 4,567 n_a 23 n a. n a 974 n a. 3,610 n.a. 2,787 1,526 1,668 1,9851983 4,521 n.a 24 n a. n.a 1.012 n-a 3.673 n.a 2 821 1,584 1,677 2.0251984 4,472 n.a 24 n a n a 1.042 n a 3.711 n.a 2,R42 1,650 1,672 2,062

n a Not Availablea Continued as beef cattleb Figure corresponding to nearest adjacent yearc Figure corresponds to 1963

Sources. Kazushi Okawa. M. Shinohara. ard M Umemura Eqtimates of Long--TermEconomic Statistics of Japan since 1869 Agriculture and Forestry. No 9 (Tokyo. 1966!:Farm Meshinery Statisti- s (1981'. and Statistical Yearbook of the Ministry ofAgriculture. Forestry and Fisheries (1983-1984i. 60th issue

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TABLE 2: PATTERN OF MODERN LABOR SAVING MACHINES IN THE UNITED STATES(thousands)

Corn Pic- FarmsNumber Number Number Tractor Number kers & Field withof of draft of horse- of Picker Pick-up Forage Milking

Year Farms animals Tractors power Trucks Combines Shellers Balers Harv. Machines

1910 6406 21857 10 500 0 1 121920 6518 22243 246 5000 139 4 10 551930 6546 17612 920 22000 900 61 50 1001940 6350 13029 1567 62000d 1047 190 110 25g 1751945 5967 11116 2354 88000e 1490 375 168 42 20 3651950 5648 7415 3394 93000 2207 714 456 196 81 63619')4 4654 4101 4345 126000 2675 980 688 448 202 7121960 3963a 2883 4685 153000 2826 1040 795 680 290 6661965 3356 4787 176000 3030 910 690 751 216 5001970 2949 4619 203000 2984 790 635 708 3041975 2521b ----- 4469 222000 3032 524f 615 667 255 -'978 2436c ----- 4804 251000 3386 656 695 747 296 -----1979 2432 4777 255000 3402 654 694 759 293 -----1980 2433 4750 262000 3418 652 690 771 2911981 2434 ----- 4722 274000 3434 650 687 783 2881982 2400 --- 4695 282000 3450 648 685 795 286 -----1983 2370 4679 286000 3457 633 685 792 284 -----1984 2333 4663 290000 3464 621 684 789 283 -----

a. From 1960 onwards is based upon 1969 definition.b. A farm is a place as of June 1 that sells or could sell $1,000 of agriculturA products during

the year.c. U.S. totals for 1978 are not directly comparable with totals for 1974 or earlier census years,

because they include State-level data from farm operators represented on the Census mailing list,plus estimates from the direct enumeration sample for farms not on the mailing list. As a result,figures for nearly all categories are somewhat higher than they would be using the earlier base.The 1974 U.S. data include only operations represented on the mailing list. Estimates arepegged to Census year data for all noncensus years before 1978.

d Average horsepower for 1930-34 multiplied by number of trectors in 1930.e Average horsepower for 1940-44 multiplied by number of tractors in 1940.f. From 1975 onwards self-propelled combines only.g- Figure corresponds to 1942.

Source: USDA, Changes in Farm Production and Efficiency. 1964 and 1973 (for data 1910 to 1965).USDA, Agricultural Statistics. 1985.

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TABLE 3. PATTERNS OF MECHANIZATION IN CHINA(thou-andsl

Area Cul-tivated Eagines Motor-with 4- for Pumps for Driven

Fov'r - Wheel Irriga- Irriga- RiceDraft, Wheel Tractors Garden Boat Farm tion and tion and Seed Trans-

Year Animals Tractors (in Ha) Tractors Tractors Trucks Drainage Drainage Threshers Combines Machine planters

1957 53680 15 2636 rn a. n a. 4 40 n.a. n.a. 2 n.a. n.a.1962 40'3S 55 8284 1 n.s. 8 367 n.a. n.a. 6 n.a. n.a.1965 43220 73 15579 4 n.a 11 558 n.a. 110 7 n.a. n.a.1970 49350 125 18222 78 n.a. 16 1471 n.a. 455 8 n.a. n-a.'975 51220 345 33203 599 n.a 40 3891 n.a. 1553 13 n.a. n.a.1979 50290 667 42219 1671 n a 97 5384 n.a. 2328 23 n.a. n.a.1980 50880 745 40990 1874 102 138 5630 4566 2498 27 17 821981 54710 792 36477 2037 113 175 5672 4756 2517 31 21 641982 58330 812 35115 2287 99 206 5803 4805 2584 34 15 451983 61250 841 33572 2750 84 275 6077 4956 2999 36 19 28

Source China Agricultural Yearbook. 1980Statistical Yearbook of China. Various issues

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TABLE 4: PATTERN OF FARM MECHANIZATION IN INDIA(Thousands)

Year 1945 1951 1956 1961 1966 1972 1977**

Draft animals 5933? 67383 70690 77986 78517 80153 82601Persian wheel n.a n.a na- 600 680 638 621Oil pumps 12 83 123 230 471 1558 2167Electric pumps 4 26 47 160 415 1618 2315Tractors 5 9 21 31 54 148 270PlowsBullock

Wooden 27306 31796 36142 38372 39880 39294 40766Iron 487 934 1376 2298 3521 5359 6258Tractor n.a. n a. nra n.a n.a. 57 81Other tillage implenmentrkBullock n.a. n. r.a. n.a 2724 17119 22281Tract-r n a rI a r a n. a. n.a. 111 275Sugarcane crushersPower 9 21 33 45 87 99Bullock 481 505 545 590 650 678 673Oil extractorsAbove 5 seers* n a. 273 66 78 74 40 37bess than 5 seers* n.a. 20 212 172 159 76 57ShellersIndigenous n.a. n.a. n.a. n.a. n.a. 175 226Power n.a n.a. n.a. n.a. n.a. 16 17ThreshersIndigenous n.a n.a. n.a, n.a. 249 n.a. n.a.Power n.a. n.a. n.a n.a. n.a. 207 378Chaff cuittersRotary n-a n.a. n.a. n.a. 4729 n.a. n.a.Power n-a. n.a. n.a. n.a. n.a. 142 200TransportBullock 8483 9862 10968 12072 12695 12960 12742Tractor n.a. n.a. n.a. n.a. n.a. 55 117Seed drill/planterBullock n.a. n.a. n.a. n.a. 1135 4049 4822Tractor n.a. n.a. n.a. n.a. n.a. 34 52Sprayer/duster n.a. n.a. na. n.a. 211 448 606

n.a. Not available*A seer equals about 2.05 pounds**Provisional

Source: Directorate of Economics and Statistics, AGRICULTURAL SITUATION IN INDIA(1976)p. 14i and INDIA AGRICULTURE IN BRIEF(1982). 19th ed., pp.138-143, Central StatisticalOrganization. STATISTICAL ABSTRACT OF INDIA 1975, PP.57-61.

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TABLE 5. OWNERSHIP AND USE OF FARM EQUlPMENT IN THE PHILIPPINES. 1971.(Thousands)

Number Number of machines Nwmber of farms using machines: RatioType of of farms owned by Owned fully Rented or provided of rentersequipment reporting farm operators or party by landlord to owners

Total number of farms 2,355 Plows 1,170 1,511 1,366 129 0.09Harrows 887 1,069 1,031 94 0.09Tractors 11 16 12 78 6.50Stripping machines,

crushers, shellers 16 19 !Q 85 4.72Harvesters and threshers 14 26 16 132 8.25Power-producing machines 5 7 6 3 2.00Carts and wheelbarrows 262 292 306 46 0.15Motor vehicles 14 19 15 69 4.60Sprayers 79 90 89 61 0.69

Source: National Census and Statistics Office, Philippine Census of Agriculture 1971.(Manila: National Economic and Development Authority, 1971)

I-

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TABLE 6: PATTERN OF FARM MECHANIZATION IN MEXICO.(Thousands)

Year 1930 1940 1950 1960 1970

Number of holdings 858 1,234 1,383 1,365 1,020Work animals n.a. n.a. 3.920 3,476 4,150Engines a n.a. 9 14 18 47Electric motors n.a. n.a. n.a. n.s. 28Tractors 4 5 23 55 91Plows

Indigenous 904 925 1,135 1,100 916Iron n.a. 720 1,128 1,286 1,301

Harrows and cultivators n.a. 102 240 308 387Threshers(fixed) 4b 2b 3b 5 3Shellers

Engine n.a. 2 3 5 13Hand n.a, 4 5 9 18

Forage choppers n.a. 2 3 6 6Carts 106 131 175 211 161Trucks 4 6 18 40 104Seed drills 26 27 60 93 122Mowers/reapers 8 5 8 10 12Hay balers n.a 2 3 5 12Combines n.a. n,a. n.a. 4 7

n a. Not availablea. Fixed and movable enginesb. May include some combinesSource: Direccion' General de Estadistica', Censos Agricola: Ganadero y Ejidal, decennial.

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T"LHu7 , SA'rTERN OF FA,XM MECHANIZATION IN SENEGAL.

Year 1950 1955 1959 1965 1970 1975

AnimalsHorses n.a. na. 98 160 2G0 210Asses n.a. n.a. 78 147 185 196Work oxen na. nDa- 1 1 2 8

Tractor<; n a. n.a 0.2 n.a. 0.5 0.4Plows 0.1 0.6 2 7 8 39Hoes 0.8 2 4 36 102 219Harvester/threshers n.a n.a. 0.1 0.1 0.3 0.1Carts

Horse n.a. n.a. la 18 23 38Ox G.3 3 6 5 5 14Ass n.a. n.a- 0 0.3 6 14

Sowing machines 11 31 46 94 120 189Groundnut lifters n.a. r.a. 0 6 18 42

n.a. Not Avaitablea. Figure corresponds to 1960..Sources: Tractors and Harvester/Thr-shers: FAO Production Yearbook, various issues.

Work Oxen. 1959-65: World Bank, Senegal: Tradition, Diversification, and EconomicDevelopment (Washington, D.C-). a

Others up to 1955: Y. Marie-Saite, La Culture attelee' au Senegal (Dakar: Direct,on de1'amenagement. 1963).

Others 1959 onward: Ministere' du Plan et de 1' Tndustrie, Situation Economique deSenegal, various issues.

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TABLE 8: TRENDS rUf TrPCYORS. TRACTOR HORSEPOWER AND HARVESTER COIMBINES, 1960-63.

5ROITH RATES (C.ZFour-Wheel Tractors 'ractor Horsepower Harvester C.--b.ne.s Fousr-*heel Tractor Harvester

Nueber rluOu Hp; ma"s s Tra-tors HP CombineSCOUUNTRR 1961 1`70 180 1983 i 96. lq7 !93M0I s 1961-65 Ii?8 199 1961-80 1>L-* :961-83 1960-00 1970-S0WESTERN EUROPEDenmark 128865 174639 189426 183u06 -' 36 208 7 4 .5 - 38781 ; uGG ,.0 -I.i4 1.ol 5.e5 -0.85France 7443400 1230200 15037;3 15350iX( 1;9% SOA_bt 4 b126 79,85 333Qr; 142400 148000 3278 0. 3.35 7.19 0.66Sermaav. iR 938002 13708b62 1463131 14'1661 lol-: 7 94 3. 5 01-7 s8200 iT;5 i16500(! I65(5O 2.3? ;.19 .07 6.70 -0.35Itali 2 .849 614712 107.166 116951 5 e 2 46527- 923 184_ 35185 39142 .4' 2.04 6.84 9.533 6.68Netherlands 88916 135293 17860lO 1880G, !l 58 14 7?- 4120 7500 6b°00 5700 3.72 1.84 3.46 7.55 -2.21Spain 63560 2598s19 573907 592010 1 23 9455 20b47 9862 31596 41568. 44025 11.74 4.15 10.68 14.95 2.79SitzerlIr,d 54000 73000 95229 10630, 6b5- 3095 3717 1569 4500 5164 4900 3.C3 3.73 3.13 q.09 1.39United Kinqdoe 402580 446813 512494 529438 12989 118108 22981 59694 65990 57350 56765 1.2B 1.09 1.25 2.89 -1.39

GROUP TOTAL 2921772 4305338 5538058 5774942 62703 156941 246830 293340 4743ai 491448 501032 3.87 1.40 3.53 7.09 0.35

N. AER ICA&CEAMIAUnited States 4690000 4564000 474000W 4550000 155:40 2C4372 264915 938000 760000 671000 676000 0.06 -I.35 -0.14 2.70 -1.24Canada 549789 596426 657400 658000 16 00 29111 40499 160058 174810 161250 161950 0.95 0.03 0.B2 4.50 -0.30Australia 264069 326725 332000 332000 7782 15060 20219 ;5iu6 63775 57700 57400 1.21 0.00 1.05 4.89 -1.00Wes Zealand 84156 96666 92349 91925 2452 44!2 5298 5726 5750 4315 3825 0.49 -0.15 0.40 3.93 -2.83

GROUP TOTAL 5588014 5603817 5821749 5631925 182574 252945 3307J1 11 6890 1004335 894265 89175 0.22 -l. :0 0.04 3.02 -1.15

ASIA

Japan 6979 279000 1471400 1584300 5234 19263 42544 it.a. 92060 113900 1011900 32.53 2.49 27.97 11.05 26.83

Korea# 24 61 2664 7469 1 2 112 n.a. 10 1211 5689 28.13 40.96 29.81 26.61 61.55China 52239 125498 744865 841600 1434 4759 54178 6206 8002 27045 35728 15.01 4.15 13.47 19.9i !?.95

ind:af 31010 100000 418116 502581 68b 2315 13649 n.a. 76n 773 2632 14.67 6.32 13.50 16.13 0.17Banoladesh n.a. 2072 4200 4700 48 128 n.a O.j. n.g. n.a. ;.82 15.64Pakistan 1310 21 00 71000 136100 !!) 2 * 3228 3 7(' 500 590 23.38 24. 17 23.49 19.41 21.73Sri Lanl,a j53 13500 2 4263 2tti% 7 2I81 904 2 . 4 22.29 2.43 19.3? 23.63 4.14S.ASIAW SuB-TGAL 328JC 16572 51,J79 669356 Bib 416 179Ij 30 82 1 Xo 3226 15.62 8.94 14.68 16.70 4.37

irdonesia 1135 8500 13000 14800 ic 312 546 .a r.a. n.a. n.a. 13.69 4.41 12.38 14.56alSaiaes 1634 4V35 805u 800C 51 174 338 n.a. n.a. n.j. n.a. 8.76 -0.21 7.49 9.92Philippines 411b 7800 17000 1850( 128 198 672 12. 230 440 520 7.75 2.86 7.07 8.64 6.70lhailand 1500 8000 '3 3. 113116 47 294 2856 n.a. n.a. n.j. n.a. 22.72 15.52 21.71 22.80ASEAN SUB-TOTAL 8385 29035 111385 i54416 262 r"B 4412 123 23G 440 520 14.58 11.49 14.16 15.16 6.70

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!ABLE 8: TRENDS OF TRACTORS. TRACTOR HORSEPOWER AND NARVESTEP COMBiNES, 1960-613.

6RWTH RATES (I1Four-Wheel Trattors Tractor Horsepower Harvester Lo0uines Four-Weel Tractor Harvester

Number (1000 HP) Nudbers Tractors HP CombinesCOUNTRY 1961 1970 1990 1983 1960 1970 1980 1961-65 1970 1980 1993 1961-90 1990-83 1961-03 1960-0 1970-90ENEMAEgvpt" 10760 17300 36000 41000 220 645 1029 n.a. 1700 2400 2150 6.56 4.43 6.27 8.02 3.51Israel 7485 16435 26900 27475 214 579 1075 948 575 550 580 6.94 0.83 6.09 8.41 -0.44NDroCO 11454 12000 24500 24080 360 441 1029 3293 3550 3200 3160 4.06 -0.57 3.44 5.39 -1.03Syria 3900 9031 27544 37216 123 332 1065 1375 1390 2358 2727 10.94 10.54 10.90 11.40 5.43Turkey 42488 104640 436281 512282 1375 3657 2PlOI 6236 8568 13667 13615 13.04 5.49 II." 13.N 4.78Yugoslavia 38045 80000 415655 523000 1134 2940 16174 9260 11858 8868 9400 13.41 7.95 12.65 14.21 -2.B6

6R011P TOTAL 114132 239406 966780 1165053 3426 8594 38873 21112 27641 31043 31632 12.90 6.41 11.14 12.91 1.17

AFRICASouth A*ricai 119200 156000 180400 191900 2250 BOBS 756Q 9217 19400 26000 30000 2.20 0.26 1.94 6.25 2.97

lZibabwe 12567 17000 20200 20300 396 625 848 185 320 560 580 2.53 0.16 2.20 3.88 5.76Kenya 6422 7247 6546 6500 202 266 275 964 1100 41. 415 0.10 -0.23 0.05 1.55 -9.33Tanzania 1584 17700 18600 18550 50 650 781 n.a. n.a. n.j. n.a. 13.84 -0.09 11.83 14.73Ethiopia 122 2913 3950 3900 4 107 166 10 37 155 150 20.08 -0.42 17.06 20.48 7.25Sudan 585 4848 11000 11200 18 178 462 120 180 1250 1150 16.70 0.60 14.36 17.62 2v.38seneQal 170 3(.o 460 460 5 !I 19 62 90 14t 145 5.38 0.00 4.63 6.90 4.52MlQerla 235 3000 8600 95 - I120 361 n a. n.a. n.a. n.a. 20.96 3.37 18.31 21.79-deeroorfi ' ! 259I JO 5" 84 .. n. a .. n.a. It.58 10.89 15.79 17.22

~P2~ lr t l V6 5 8 i '2 AL .12 t 1. bq5 2 X i l 97 o6 .9 i >4 i ; 417 n 2I 2440 6. 35 0.80 5.55 7.56 3.19

V!2N AflEP!rAArQent!ria lHIb43 It83i5 16b600 15000c 145 6086 8b iC .400G ' 46'Q 44(lilv 45300 2.18 -3.45 1.3° 4.63 2.41hra.sit 634Qj 165870 33Q000 350(Of0 IQL 53755 i3449 n.j. 260(Q 36001 39000 9 Ob 1.98 8.07 10.07 3.31P.rjqua i200 .2t30 3200 8500 i 81 130 rt.a r.a. n.a. n.a. 4.86 38.45 9.91 10.71Ch I i e- 196S4 21520 34600 '34730 4' 1121 869 8240 °0w 820vi 8350 3.02 Q.12 2.62 3.09 -2.56Lonobila 23539 2'13 28423 28700 '41 1075 I15I n.. 1 400 ,?100 2250 1.00 0.32 0.91 2.24 4.14Peru nS5v 10976 13900 1 30( 2'J4 403 571 n.d. n.j. n.j. n.a. 4.04 ?.56 4.51 5.28Vene:uela i1480 19200 38000 41500 '20 68' 1554 563 1729 3200 4000 b.50 2.98 6.0. 8.22 6.35COC!d P-,a R638 5100 J5V5 b 10 87 18 50 5bq '80 1020 1060 4.3' 0.83 3.88 5.67 2.72Met i c of '9030 91354 115057 OQGUO 1!-q 4'35 4788 n.d. 119012 I 000j 1500 5.86 13.88 6.92 7.04 4.13

GPOllP 7TH1; 2 :'Q- 50728 72358iQ0 848 3 E 5J24 1 9581; 7136- 43'?2 84at 109 52 116460 5.25 3.21 4.96 6.73 2.66

ra Not Available

*Harvester Coebine Jita tar IQle -5 a three-vear averaQe. 1%t-''.

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n.a. Not Available.

*Harvester Combine data for 1970 is a three-year average, 1969-71.

Notes:

1. Tractor data generally refer to total wheel and crawler tractors (excludinggarden tractors) used in agriculture. Crawler and wheel tractors are definedas tractors with two axles and above 8 horsepower. Garden tractors orpower tillers are defined as tractors with only one axle.

2. Tractor horsepower data were taken from Hayami and Ruttan (1985) or computedusing their.-methodology. Computations include the horsepower of garden trac-tors or power tillers. For further details, see the aforementioned source.

3. Harvester Combines are defined as machines which can both harvest and threshregardless of size.

Source: FAQ Production Yearbooks, various issues.China Statistical Yearbook, various issues.China Agricultural Yearbook, 1980.

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TABLE 9. TRENDS OF AGRICULTURAL. ARABLE AND IRRIGATED LAND. 1960-83.

Agricultural Land Arable Land Irrigated Area(1000 HA) (1000 HA) (1M000 HA)

COUNTRY 1960 1970 1980 1983 1960 1970 1980 1983 1964 197J 1980 1983WESTERN EUROPEDenmark 3126 2975 2905 2881 2772 2661 2639 2625 1 E0 391 400France 34587 32495 31526 31285 19652 17417 17219 17370 515 7b0 1088 1140Germany. FR 13620 12737 12250 12079 7764 7334 7270 7233 263 284 315 318Italy 20930 20180 17562 17273 13002 11984 9466 9406 2805 2561 2870 2950Netherlands 2314 2193 2021 2008 999 824 829 835 48 210 275 509Spain 33123 32119 31238 31179 15981 15690 15558 15592 2144 2379 3029 3133Switzerland 2165 2174 2020 2021 424 367 391 391 22 25 25 25UJnited Kingdom 19904 18849 18469 18691 7198 7116 6931 6923 105 86 140 150

(;ROtF TOTAL 129769 123722 117991 117417 67792 63393 60303 60375 5903 6387 8133 8625

N AMERICA&OCEANIAlnited States 449810 434400 428163 431382 180080 18873. 188755 187881 14996 16000 20582 19831 aCanada 60683 64450 69020 70180 39600 41820 45090 46200 370 421 580 625Alistraiia 468135 494600 49630) 491572 29570 41614 44232 46400 1170 1476 1500 1750New Zealand 13204 13261 146f9 14575 495 565 435 446 81 111 166 230

..RO'1' TOTAL. 991832 1006711 100809? 1007709 249745 272734 278512 280927 16617 18008 22828 22436

AS IAJIapar 6080 579r S461 -411 *83 4910 4294 4238 3126 3310 3250 3240

Korea 2044 2324 2244 2236 1955 2153 2060 2032 690 1000 1150 1190:China 325761 388195 .186097 386584 104041 125050 98430 97482 77800 42000 45388 45144

Irdia 176346 17B050 181130 180300 156081 160610 165200 164850 25871 30440 39350 39500Bangladesh 9462 9697 9730 9736 8662 8885 8913 8917 517 1058 1639 1848Pakistan 22751 24332 25320 25490 17600 19167 20G30 20150 11439 12950 14680 14720Sri Lanka 1723 2418 2586 2625 629 895 1025 1064 381 465 525 538- ASIAN SUB TOTAL 210282 214497 218766 218151 182972 189557 195168 194981 38208 44913 56194 56606

Indonesia 29651 30710 31730 32210 12020 13070 14270 15000 4125 4370 5418 5418Malaysia 3484 3976 4337 4367 820 920 1000 1020 244 241 370 334Philippines 9849 10400 12690 12370 7100 7228 7050 7850 930 826 1300 1400Thailand 12808 14116 18606 19678 11200 12300 16515 17400 1764 1960 3015 3472ASEAN SlB- TOTAL 55792 59202 67363 68625 31140 33518 38835 41270 7063 7397 10103 10624

EMENAEgypt 2481 2843 2855 2471 2405 2725 2700 2308 2506 2843 2447 2471Israel 1125 1227 1231 1255 325 325 325 344 149 168 203 220Morocco 19270 20005 20390 20894 6400 7076 7416 7914 630 340 510 520Syria 14940 13459 14062 1q991 6080 5651 5230 5087 489 451 539 580Turkey 36871 38178 38179 35090 23162 24793 25354 23468 1350 1800 2070 2120Yugoslavia 14923 14626 14285 14190 7660 7497 7153 7C74 127 130 145 161

GROUP TOTAL 89610 90338 91002 88391 46032 48067 48178 46195 5251 5732 5914 6072

AFRICASouth Africa 98339 96182 94082 93470 11985 12370 12770 12820 870 1000 1020 1128

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TABLE 9 TRENDS OF AGRICULTURAL, AkABLE AND IRRIGATED LAND. 1960-83

Agricultural Land Arable Land Irrigated Area(1000 HAI (1000 HAI (1000 HA)

COUNTRY 1960 1970 1980 1983 1960 1970 1980 1983 1964 1970 1980 1983

Zimbabwe 6707 7238 7395 7538 1820 2335 2465 2600 32 46 100 100

Kenya 5371 5910 6035 6060 1048 1635 1790 1830 14 29 46 46

Tanzania 38106 39820 40160 40190 2420 3870 4110 4130 35 46 64 60

Ethiopia 57486 59150 59280 59180 11008 12530 13150 13200 48 55 60 55Sudan 66704 67700 68417 68448 10680 11665 12360 12390 602 1250 1800 1750

Senegal 9962 10456 10925 10925 4258 4747 5220 5220 80 110 180 180

Nigeria 47098 49743 51285 51375 25810 27420 27850 27900 10 15 30 32

Cameroon 14394 14278 15230 15260 5024 5400 5910 5910 5 7 10 10

S S.AFRICA S-TOTAL 245828 254289 258727 258976 62068 69602 72855 73180 826 1558 2290 2233

LATIN AHERICAArgentina 174016 177701 178400 175600 18322 23851 25150 26000 1600 1280 1580 1640

Brazil 163638 198122 232120 238700 41200 46000 60000 63000 570 796 1800 2100

Paraguay 14313 15445 17520 17490 700 805 1620 1640 30 40 60 62

Chile 13441 15890 17410 17428 3846 4692 5332 5330 1091 1180 1255 1257

Colombia 35047 35054 35650 35690 3538 3596 4050 4050 235 250 310 320

Peru 30034 29933 30520 30637 1702 2558 3100 3200 1060 1106 1180 1190Venezuela 18730 19933 20955 21108 2580 2840 3080 3080 225 284 315 320

Costa Rica 1403 1856 2500 2802 285 285 283 283 26 26 26 28

Mexico 98316 97637 97829 98099 22452 21688 21800 22050 4200 3583 5100 5250

GROUP TOTAL 548938 591571 632904 640554 94625 106315 124415 128633 9037 8545 11626 12167

IIOTES:

1. Agricultural Land is defined as the mum of arable land, land under permanent crops and land under permanentpasture.

2. Arable Land is defined as the sun of land under temporary :rops (double-cropped areas are counted only once),temporary meadows for mowing or pasture, land under market and kitchen gardens (including cultivation under

glass), and land temporarily fallow or lying idle.

Source: FAO Production Yearbooks, Various Issues.

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TABLE 10: SHARE 'IF AGRICULTURE IN GOP AND IN THE LABOR FORCE: ACTUAL AND PROJECTED.

Contribution Total Acricultural Labor Force Year in Aqricultmiral Norkers perof Agriculture Share of Labor in AnIriculturp in Thousands which thousand hectares of

to GDP Actual Projected Actual Projected TALF AqrIEUltural Land

COUNTR~ 1960 1980 1960 19B0 1983 2OC0 2020 1960 1980l 1983 21000 2020 declines 1990 2000 2020

WE STERN EUROPEDenmark it 4 118.1 7.0 6.1 3. 2.9 376 i73 1.51 9J 68 1960 59.6 32.6 23.4

France 1 2.! 86 .5 4.5 . 4345 "98q 1779 117(0 948 1970 63.1 37.1 30.1

Germany, F9, 2 14.2 4. 1 2.1 1.t 3719 lib4 9821 605 423 1960 95.0 49.4 34.5

Italy ~~~ ~~~12 6 30.8 II.", .5 S 4.t b621' 2349 24026 1327 1015 1960 133.8 15.6 57.8

Netherlands 3 1 10.8 5. 4 4.7 2.8 21. 447 93 28 174 130 1960 145.0 86.1 64.5

Spain 9 42. 1 17.2 51 .' . 4862 2250 24024 1393 1207 1960 72.0 44.6 38.6

Swutterland n.d. P.6. 11.4 .2 4.6 _. .1 21 164 149 89 64 1960 81.2 44.0 31.5

United *ingdoa 3 2 4.0 2.I. . ? 525 478 284 223 1960 28.4 15.4 12.1

broup ½ta~~~~~ 8 3 ~~~6. S . 2 .2 212% 8%? '853 5136 40~~~~~~~~~~~~~~7 75.5 43.5 34.6.5 34.

tlue S3iip, 4 t .2 .. 481~ 2229 201B 1419 1140 19b0 .2 1.3 2.7

~~dfladd ~~6 4 J2 .c 4.? I. . 884 526 464 327 262 1960 7.5 4.7 3.8

Austr a Iii 12 6 11.4 5.8 5.2 3. .4 469 3~62 340 249 212 1960 0.7 0.5 0.4

New 2ea!1and n.a. Il 14)7 9.3 8.6 4.9 3).8 1310 117 III 74 65i 1960 8.0 5.1 4.5

Group 'ota; 4 3 >4 2.? 2.; 1.5, 0.1 6302 3228 2933 2069 1680 3.2 2. 1.7

AS IAJapan 13 4 32.4 11.0 9.2 .8 4.5 14402' 6622 5639 3825 2816 1960 1210.8 700.5 515.6

Korea 3 7 16 66.4 38.6 35.0 30.7 24.4 5470 5623 5412 6375 5999 2015 250.1 2941.0 2673.6

China# 27 45j 65.8 72.1 70.7 612.1 50.7 170190 302110 325100 375477 352821 2015 732.5 972.5 923.0

Indid 50 37 74.0 63.2 60.q 53.9 45.4 136286 166949 169677 226518 264748 2025 921.7 1250.6 1461.6

Bangladesh 57 53 88.8 83.8 8l. 8 -7.* I 1. n 16075 25517 2 26786 43536 62737 2040 25917.1 4474.4 6447.3

Pakistan 46 31 6b. 53 .5 51.9 48.9 45.i 8787 12622 13354 22363 36490 2045 499.5 893.2 1441.2

Sr,. Lanka 32 2? 5.3 ; 53.7 2. 45.7 37,.8 1909 2745 2930 3421 3967 2020 1061.5 1400.3 1534.2

S.AS11AN SUB-TOTAL 501 3 74.0 64.3 b:.. 55. 48.2 1630157 207488 212747 296038 367943 948.4 1353.2 1681-9

indon~esia J( 2! -4.0 58.9 56.5' 5l. 4 42.5 25434 30350 30665 42108 49653 2025 95.5 1327.1 1564.9

MalaySid 36 24 63.1 4>.8 45.4 41.8 35.1 1706 223 313 3393 3883 2020 519.5 782.3 89.3

Phiilippines 26 2t J 4 4 O-C 43.9 41.3 36.1 8048 '674 7862 12331 15864 2030 604.7 971.7 1250.2

Thatiand 40 2-5 83.7 75.4 73.9 66.9 57.1 11332 15677 16277 22982 25697 2020 842.6 1235.2 1391.1

ASEAN SUB-TIOTAL 41 24 76.0 59.9 571.5 51.8 43. 465270 55954 57117 80814 95098 830.6 1199.7 1411.7

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TABLE 10: SHARE OF AGRICUILTURE IN GDP AND IN THE LABOP FORCE: ACTUAL AND PROJECTED.

Contributioni Total Aoricultural Labor Force Year in Agricultral orlkers perof Aqriculture Share of LatlOf Li AOrLculture ( in Thousands ) wlch thousand hectares of

to GDP Actual Projected Actual Projected TALF Agricultural LandCOUNTRi 1960 1980 1960 1980 1983 'i00 2026 1960 1980 1983 2000 2020 declines 1980 2000 2020

[ME NAqvYpt 21 58.4 50 49.2 44.. 39.2 4366 *851 6191 888 11745 2035 2049.4 3112.1 4114.0Israel 1 1 5 14.3 6.9 6_ 7. 2.8 108 95 91 78 77 1960 77.2 63.7 62.6Morocco 2 18 o2.5 51.S 49.4 45.7 40t. 2109 2705 2898 4408 6264 2035 132.7 216.2 307.2Syria*# 18 20 54.2 47.5 46.4 46.? 4t.4 692 106Q 1157 2269 3865 2040 76.0 161.3 274.8lurfev 41 t 78.5 54.4 50.1 44.6 I.t9 1'8978 IQ0029 3314 13512 16086 2025 262.7 353.9 421.3ugostavia 24 1J o3 . 37.4 33.8 . 25.7 18. 5319 3819 3540( 2973 2218 2020 267.3 208.1 155.3

GrOUip TOtaji 29 I' 66.9 47. 45.1 40. 9 36.1 2340(9 '.ib8 a 3661 32126 40255 259.0 353.0 442.3

AFPICASoutr! Airlcd 1 6 . 28. 7.5 .5.0 1l.F 13 33 2974 3034 2706 3270 l980 31.6 28.8 34.8

ebaibwe 28 14 b8. 9.58.7 v54.' 49_- 906 1417 1499 '726 4472 2040 191.6 368.6 604.8

ker,ya 3Y 3 . 85.8 77.6 7b 0 '. 3 ; ? , 2868 4917 5346 10399 20337 2050 814.7 1723.2 3369.9

ldn an: a J ' 50 89.6 81.0 79*7 74.4 69.4 3892 6236 6655 10677 19Y88 post-2050 155.3 265.9 497.7[thiopia 64 51 88.0 79.1 ' .4 ! .3 6.3J J 0 10440 10799 16119 26651 post-2050 176.1 271.9 449.6Sudan-* 46 36 85.7 76.9 75.1 69.v 63.1 3333 4451 4703 695(' 11602 2050 65.1 101.6 169.6SeneQlal 24 23 83.5 74.4 21 .6 6b;.3 6h.4 1213 1758 1827 2736 4486 2050 160.9 250.4 410.6NiQerla 63 22 70.8 53.3 50.5 47.9 46.0 13111 16173 16583 27097 51176 2050 315.4 529.4 997.9[aeerooni 'J4 29 88.0 80.7 19.4 '2.Q 6.8 2218 3203 3315 5228 9750 2050 210.3 343.3 640.2S.S.AFRICA S TOTAL 49 25 79.9 69.5 65.2 61.0 5?.t 35608 40595 50727 81933 148462 197.8 316.7 573.8

LAlIN AMERICAArqentina 16 2 0.0 13.0 ".! 6.8 5.4 1625 1399 1364 938 914 1960 7.8 5.3 5.1Brazil 15 17 51.9 38.2 35.8 33.9 29.4 11866 14572 14687 20997 24780 2020 62.8 90.5 106.8Paraquav 36 29 S6.5 48.9 47.9 44.7 38.3 326 498 537 B31 1023 2025 29.4 47.4 58.4Chile 9 3o.0 18.4 17.0 9.7 7.6 751 678 671 501 463 2960 38.9 28.8 26.6Cl oeb Ia 34 28 51.4 27.4 24.8 14.4 11.3 2506 2106 2062 1782 I888 1960 59.1 50.0 53.CPeru 17 B 52.5 37.3 35.2 19.6 15.4 1643 1901 IY59 2776 2047 1990 62.3 58.2 67.1Veneziela 6 6 34.9 18.0 16.1 9.5 7.4 826 857 862 817 884 1990 40.9 39.0 42.2Costa Rica 26 18 51.3 35.1 33.0 18.5 14.5 l94 268 278 234 247 1990 107.2 93.5 98.7Mei 1 co 16 B 55.2 36.0 33.S 18.9 14.9 6057 7204 7258 7145 5384 1990 73.6 73.0 85.7

Group Total 16 11 46.2 32.rA 30.0 23.1 19.4 25794 29483 29678 350zU) 40627 46.6 55.3 64.2

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Notes:

The following regression was used to estimate the future shares of labor in agriculture fordevloping countries:

Rn - -0.0013 + 0.68164 Rt + 0.000293 Po

where:Rn - rate of growth of nonagricultural labor forceRt - rate of growth of population 15-64Po - proportion of labor force in agriculture at the beginning of the period

An alternative method 'was used where developed countries were involved due to the decreasing na-ture of the population 15-64:

Pt - Poe -0.2231 + 0.005t where t - 0 to 45

Pt - percent of labor force in agriculture in time tPo - corresponding percent in time '0'ea _ 0.8 and a - -0.2231 ; b - 0.005

The figures were then adjusted using the labor force participation rate for the country in 1980.

Source of Basic Data: World Development Report 1982.World Tables 1983.FAQ Production Yearbooks, various issues.World Population Projections 1986. (forthcoming)Zachariah (1986).

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TABLE 11: REAL WAGE TRENDS. 1950-84 (Growth Rates X

(4)* (5)(1) 2I CONSUMP- PRODUCT OTHER (6)

;OUNTRY PERIOD TION WAGE WAGE DEFLATORS SOURCE AND NOTES

I DENMARK 50-6G 2.5 ---60-70 4 1 5 570-80 5.9 8.280-84 1.6 2 450-84 3.7 6 1 --- (4):1960-84

2 FRANCE 50-60 7 2 --- 1951-6060-70 5.1 5 5 ---70-80 11.3 11.4 --- 1970-7780-84 --- --- --- N.A.50-84 7,4 7 9 (3):1951-77; (4):1960-77

3. GERMANY. FR 50-60 5.5 ---60-70 5.4 6 1 ---70-80 3.7 6.9 ---80-84 0 1 5.3 ---50-84 4 3 6.3 --- (4):1960-84

4 NETHERLANDS 50-60 3 9 -- ---60-70 4 6 -- ---70-80 4 3 10 ---80 84 -0 9 0.3 --- 1980-83F.0-84 3 8 7 6 --- (3):1950-83; (4).1960-83

- SPAIN 50-60 - --- NA.60 70 6 7 9.1 1965-7070 80 4 3 7.980-84 -1.4 6 3 (3):1980-83, (4).1980-8150-84 4 8.2 --- (3):1965-83; (4):1965-81

6 SWITZERLANID 50-60 --- --- N A60-70 -- --- -- NA.70-80 -2.1 --- -- (3):1973-80, (4):N.A.e0-84 0.5 --- - (4):N.A,50-84 80. (4):3) 1973- to 1963.

Source N A

7UNITED KINGDOM 50-60 3.1 --- _ (3)-1953-6060-0n 2 2 4 770-80 2 5 5.680-84 1 7 3 1 --- 1980-8350-84 2.5 4.9 --- (3)-1953-83, (4):1960-83

8 N S A 50-60 1 8 ---60-70 3 3 5 ---70 80 0 6 -0 2 ---80-84 --- --- --- N.A.50-84 1.8 1.6 --- (3)&(4):1960-80

9. CANADA 50-60 2 --- ---60-70 4 5.1 --- (4):1961-'10

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TABLE 11 REAL WAGE TRENDS. 1950-84 iGrowth Rates %)

(3)* (4)* (5)'11 (2) CONSUMP- PRODUCT OTHER (0)

COIJNTR'i' PERIOD TIoN WAGE WAGE DEFLATORS SOURCE AF) NOTES70-80 2.8 -0.8 ---80-84 -3.8 1.1 ---50-84 2.1 1.8 --- (4:1961-e-!

10 AUSTRALIA 50-60 0.5 --- --- (3):1952-5860-70 --- --- N.A.70-80 --- -2.7 --- (3):N.A.; (4):1975-8080-84 4 -1.6 --- 1980-8250-84 1.6 -2.4 --- (3):1952-82; (4):1975-82

I1. NEW ZEALAND 50-60 -0.03 --- --- (4):N.A.60-70 -1 6 --- --- (4):N.A.70-80 3.3 --- --- (4)-hA.80-84 1.8 --- --- (4):N-A.50-84 0 7 --- --- (4):N.A.

12 JAPAN 50-60 2.960-70 8 6 8 ---70-80 2 1 4 180-84 0.5 3.450-84 4 5.6 --- (41:1960-84

1! KOREA 50-60 7 7 --- --- (3):1959-6060-70 5 1 370-80 9.6 580-84 0 5 3.5 ---50-84 6 1 3.2 --- 3):1959-84: (4l:1960-84

14 INDIA 50-60 -- --- -- .A.60-70 --- --- --- N_A.70-80 -0 9 -0.9 -- 1976-8080-84 -I -2.8 --- 1980-8350-84 1 -1.7 -0 2 (3)&(4):1976-83, (5)1960-

80,Quizon and Binswanger(1984)

A PUNJAB** 50-60 - --- --- N.A60 70 --- 124 (3)&(4):N.A.' (51:1964-7070-80 - --- -12 1 (3)&(4):N.A. (5).1970-7480-84 --- --- N.A.50-84 -- 1 6 (3)&(41:N.A (5):1964-74

B BIHAR** 50-60 -- -- N.A60-M 0 731&14):N A (51.1964-7070-8t' .-- -2,9 3 3)&(4):N.A.: (5l:1970-748( -84 --- N.A[0-84 - --- ;I 13)&(4).N.A . (51:1964-74

WEST BENGAL. 50 6?' _ N Ak00 70 1 2 f31&(41.N.A (51:1960-69

-h -( - 2 ? ( - )&4):N A (: {1 1970 79

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TABLE 11: REA!. WAGE TRENDS. 1950-84 (Growth Rates )

(3i* (4)* (5),2) CONSUMP- PRODUCT OTHER (6)

COUNTRY PERIOD TION WAGE WAGE DEFLATORS SOURCE AND NOTES80-84 ,WA.50-84 0 4 (3)&(4) N A-; (5):1961-79

D KERALA 50-60 --- --- N.A.60-70 -- --- 2 (3)&(4)-N-A., (5):1960-6970-80 -3 7 (3)&(4)-N.A , (5)I1970-7980-84 --- N.A.50--84 --- -- 0 9 (3)&(4):N.A.; (5):1961-79

15 BANGLADESH 50-60 --- --- --- N.A,60-70 -- --- --- N.A.TO0--80 -3 9 -2 2 ---

80-84 1 4 2 4 ---50-84 -2 4 -0 9 --- 1970-84

16 PAKISTAN 5C 60 -- ---60-70 3 3 5 2 -- 1964-70?0-80 3 2 3 680-84 23 6 23 650-84 7 7 8 --- 1964-84

1 SRI LANKA*** 50-60 2 2 --- ---60-70 -0 2 1 -0 1 (5):Bhalla-Glewe Index70-80 6 8 2 1 0 4 (5):Bhalla-Glewe Index80-84 -3 6 -5 8 -0 5 (5):B-G,1980-82.50-84 2 1 0 3 -e 5 f4):1960-84.

(5):B-G, 1960-82.

18 MALAYSIA 50-60 --- --- --- N A.60-70 04 --- --- (3):1966-70; (4):N.A70-80 2 1 0 5 -- 1970-7980-84 --- --- --- NA.50-84 1 3 0 5 - (3) 1966-79; (4)-1970-79

19 PHILIPPINES 50-60 0 7 --- --60-7G 0 5 -3 1 --- 1960-7170-B0 -0 2 1 3 --- 1971-8080-84 4 1 -0 5 --- 1980-82',0-84 -0 2 -1 1 -- (31:1950-82. (4);1960-82

20 ISRAEL 50-60 --- - - -- N.A60-70 5 6 --- - (3):1962-70, (4):N-A70-80 3 5 --- --- (4):NA.80-84 A 2 --- --- (3):1980-83. (4!-N-A.5G-84 4.4 -- -- (3).1962-83. (4):N,A.

21 SYRIA 50-60 - -- --- --- NA.60-70 -1 7 -7 1 --- 1969-7070-80 -3 1 -3 3 --- 1970-7780-84 --- --- --- N.A.50-84 -2 9 -3 8 --- 1969-77

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TABLE 11 REAL WAGE TRENDS. 1950-84 (Growth Rates V

f3)* (4)* (51CONSUMP- PRODUCT OTHER (6)

'(-I)NTRY PERIOD TION WAGE WAGE DEFLATORS SOURCE AND NOTES

M(RO(C)'l 50 6I 1I 3 - (3) 1952-6060 7rj 1 0)470 80, 13 5 6 2 - 1970-7380 84 - NA50-84 i9 11 '3R-19b2-73. (4)1960-73

TUtRKEY 5 60 .' 73i:1957 606 7 5 4

70 80 -e 2 5 780-84 4 7 8 3 1980-8250-84 2 5 -- (3) 1957-60, '4,;1960-82

.4 YU'GOOLAVIA 50-6 P 3 -- i3i:1956-60e0 'i 94 2 9 5 --708 1 8 3 26(-84 4 3 -6 350-84 4 4 4 1 --- 13) 1956-84. 14):1960-84

' VAMEROX)N 5fi-O - -- N A60-70 -i 6 ---70-80 3 7 -3 2 --- 1970-7480-84 - -- N.A50-84 - --- (31 1960-74. (4) N-A.

,f N'iERIA -6C 0 -6-- N A60-7G --- --- N A70 8Ci F 4 6 8 - 1972-8080-84 - --- --50 84 4 6- 8 - 1972-80

ZIMBABWE '0-6ii -- -- - N A60-7( - -- -- N.A70-80 2 9 -4 1 - 1973-8080-84 14 2 11 9 1980-8350-84 6 2 0 4 -- 1973-83

0(3 KENYA 50 60 i 3 -- (3):1956-6060-70 4 8 4 3 -- (431 1964-7070-80 0 4 2 4 --80-84 7 f6 -5 8 --- 1980-8350-84 1 2 1 7 --- (3):1956-83. (41:1964-83

29 TANZANIA 50-60 - --- --- NA.60-7G 11 5 1 2 --- (4):1965-7070-80 --3 7 -3.480-84 --- --- --- N.A50-84 3 1 -1 9 --- (31:1960-80. (41:1965-8O

30 SENEGAL 50-60 --- --- --- N.A.0 -70 -5. 2 4 3 -- 1960-65

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TABLE '1 REAL WAGE TRENDS 1950-84 (Growth Rates VS

3'* (41* .S;Z , CONCUMfP PRODUCT OTHER (6s

'WI'NTRY iERIfD TION WAGE WAGE DEFLATORS SOURCE AND NOTES'r; 8]': -- --- N A80-84 - N A

50-84 -5 2 -4-3 1960-65

31 ARGENTINA 50-60 N AS0-70* 5.3 -- 3):N.A, (4):1965-7070-80 4 2 -8.? - 1970-7780)84 -- - NA50-84 4 2 -2.2 (3):1970-77, (4): 1965-77

32 CHILE 50 60 -3 --- (3) 1957-6060--70; 4 5 3.3?0-80 8 fi -0 6 --

80-84 -4 4 2 8 -50-84 3 ? 1 6 - (3).1957 84, (4)1960-84

33 COLOMBIA 50-60 1 460-70 1 7 18 -

?0-80 -- -- --- N A80-84 - --- --- N-A50-84 1.5 1.8 -- (31:1950-70, (4)-1960-70

34 PERU 50-60 5 2 --- (3):1952-6060-70 5 9 8 4 --- 1960-6270- 80 ---- -- -- N.A80-84 -- --- --- N-A.50-0-4 5 3 8 4 --- (3):1952-62. (4):196C-62

3' 'OSTA RIt;A 50-60 4 4 -- -- (3):1952-6C60-70 0 03 1 - -

7G-80 3.5 0 280-84 0 2 0.5 --- 1980-8350-84 2 3 0.6 --- (3):1952-83. f4):1960-83

37 MEXICO0 50-6r) 5 4 --60i-70 5 8 5.1 ---70--80 3 2 3 ---80-84 -6.3 -4.6 ---50-84 3.4 2 5 --- (4):1960-84

*The Consumption Wage is agricultural wage deflated by the ConsumerPrice Index ICPI) while the Product Wage is agricultural wage deflatedby the implicit price deflator of GDP in Agriculture.

**Taken from Khan and Lee (1984). p.12.

***The Bhalla-Glewwe Indices were taken from Bhalla and Glewwe (1985)

Source. ILO Labour Yearbooks. various issues.World Bank Data Base.

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