Mechanism of factor substitution during rapid development of China's agricultural mechanization

Abstract: Since 2004, with the rapid rise of labor prices, the application of agricultural machinery in China's agricultural production has increased and the process of agricultural mechanization has been rapidly advancing in the "golden decade". It is a research subject with both theoretical significance and policy reference value to explore the substitution of labor by agricultural machinery during this period, and to study the phased characteristics and continuity of factor substitution. Based on the provincial panel data from 2004 to 2016, this paper uses the translog cost function to calculate the substitution elasticity between machinery and labor in the production of 3 major grain crops i.e. wheat, maize and rice, focusing on the difference between crops and between regions, and their spatial and temporal variations. The data used in this paper come from National Agricultural Product Cost And Income Data Compilation, and China Statistical Yearbook (2002-2017). The results showed that: 1) The development of China's agricultural mechanization experiences a "golden decade", mainly due to the widespread, effective, and sustained replacement of labor by agricultural machinery, the substitution elasticity between agricultural machinery and labor for wheat, maize and rice was 0.581、1.324 and 1.153, respectively, and the mechanization of maize and rice at key production link is remarkable. 2) The substitution elasticity of wheat was stable at around 0.6 during 2004-2016, while the substitution elasticity of maize and rice showed a long-term downward trend, which decreased from 1.545 and 1.224 to 1.225 and 1.152 respectively. It means that when agricultural mechanization reached a higher level, the difficulty of factor substitution gradually increased and the substitution elasticity tended to decline, and it is much more difficult to increase the mechanization level of grain crops in the future. 3) Affected by factors such as the topography of operations, the development of agricultural mechanization in various provinces is at different stages, and there is a clear difference of the substitution elasticity between agricultural machinery and labor in grain production. The substitution elasticity of the southern low-lying hilly region, and the hilly and mountainous area in the southwest is generally higher than that in other regions, and there is a large space to increase the agricultural mechanization level in these regions, which might keep a remarkable increase. 4) With the general increase of mechanization level, the substitution elasticity shows the characteristics of temporal and spatial convergence, and the regional differences are gradually reduced and the whole tends to be stable. This can be used to explain the slowdown of the speed of China's agricultural mechanization, and it also means that relying solely on the mechanization of food crops to stimulate the overall level of agriculture mechanization has become a thing of the past. In the future, the rapid growth of agricultural mechanization in China is faced with unprecedented difficulties and challenges, and it needs 5 aspects of measures to deal with this situation, such as enhancing the mechanization level of hilly and mountainous areas, promoting the mechanization toward whole and entire development, promoting the using of new multi-machinery and information-based smart machinery through machinery purchase subsidy policy, and reducing operational links and labor force participation directly.