Agricultural mechanization and farm household income: evidence from smallholder systems in China

Agricultural mechanization offers a critical pathway to raising farm household incomes in developing countries burdened by growing labour shortages and ageing rural populations. Drawing on microdata from 1,493 smallholders across three Chinese provinces, this study investigates how mechanization adoption shapes farm household income. OLS estimates indicate that mechanized households earn approximately 20% more than their non-mechanized counterparts. Mechanism analysis uncovers two structural pathways through which this premium operates: vertical value-chain extension, whereby mechanization enables smallholders to participate in machinery service markets and agro-processing activities; and horizontal crop diversification, whereby relaxed peak-season labour constraints broaden feasible crop portfolios. Heterogeneity analysis further shows that training experience attenuates the income premium, consistent with partial substitutability between knowledge-based and capital-based productivity improvements, while market proximity amplifies it.