Heterogeneity in factor endowments and the degree of specializations induced by comparative advantages are among the crucial factors that affect the overall productivity of the economy. Few studies, however, investigate what strengthens such endowment-related specialization patterns in the agricultural sector in low-income countries, although such evolutions have profound effects on the role of factor endowments in households’ behaviors. This is in contrast to well-established international trade theory, such as the Heckscher–Ohlin theorem which describes how heterogeneity in endowment across countries gives rise to comparative advantages for specialization and trade. We partly fill this critical knowledge gap by providing a set of evidence from Nepal, which is a country that has historically been dominated by smallholder farmers and yet has recently been experiencing rapid structural transformation within the agricultural sector. Specifically, we show the following: the agricultural sector in Nepal has experienced a significant increase in returns-to-scale (RTS) in production in recent years during the process of growing adoptions of agricultural mechanization through the custom-hiring market. Such increase in RTS has primarily strengthened the linkages between factor endowment heterogeneity (across farm households) and their specialization behaviors in labor, land, and the agricultural capital market. Both cross-section and panel-data of households in Nepal extracted from Nepal Living Standards Surveys are used to generate this evidence. We find that rising RTS associated primarily with tractor use growth has been inducing greater exploitations of comparative advantages; agricultural households have been increasingly specializing in exchanges of production factors, services, and outputs, in ways consistent with predictions based on their relative factor endowments. Specifically, the rise in RTS has induced households with more labor, land, and capital endowments to rent out their labor, land, and credit, respectively, within the agricultural sector, while increasingly renting-in the other factors with which they are less endowed. The results suggest that understanding factor endowments heterogeneity among agricultural households is becoming increasingly important for effective agricultural policy designs in countries like Nepal, where employment shares in the agricultural sector remain high despite the growth in mechanization.

Agricultural mechanization has often been characterized by scale-effects and increased specialization. Such characterizations, however, fail to explain how mechanization may grow in Africa where production environments are more heterogeneous and diversification of production may help in mitigating risks from increasingly uncertain climatic conditions. Using panel data from farm households and crop-specific production costs in Nigeria, we estimate how the adoption of animal traction or tractors affects the economies of scope (EOS) between rice, non-rice grains, legume/seed crops, and other crops, which are the crop groups that are most widely grown with animal traction or tractors in Nigeria. The results indicate that the adoption of these mechanization technologies is associated with lower EOS between non-rice grains, legume/seed crops, and other crops, but greater EOS between rice and other crops. An increase in EOS for rice is indicated in both primal and dual analytical approaches. Mechanical technologies may raise EOS between crops that are grown in more heterogeneous environments, even though it may lower EOS between crops that are grown in relatively similar environments. To the best of our knowledge, this is the first paper that shows the effects of mechanical technologies on EOS in agriculture in developing countries.

Mechanization increases the power applied to agricultural operations and is one tool among many for improving farm productivity. It alone cannot drive the transformation of agriculture (Pingali 2007). Farmers will mechanize to lower costs and ensure timeliness of operations, allowing a greater area of land to be cultivated. The demand for mechanization is therefore determined by the stage of agricultural transformation reflecting the use of complementary inputs (improved seeds, fertilizer), the intensity of farming, land hold-ings, and rural labor supply. Countries across developing Asia have mechanized at different rates corresponding to their level of agricul-tural transformation but also strongly influenced by government policies. ReSAKSS-Asia organized a knowledge exchange event entitled “Agriculture and Rural Transformation in Asia: Past Experiences and Fu-ture Opportunities” to discuss, among many topics, insights into how agricultural mechanization has evolved in countries with different agroecological, institutional and political settings, and what common lessons can be learned for those countries at the early stage of mechanization. This brief summarizes some of the key lessons shared by participants.

The growth of agricultural productivity is widely believed to be low. But this study finds the productivity rate in agriculture to be higher than that in manufacturing, both on average and for groups of countries at different stages of development. This suggests that a large agricultural sector need not be a disadvantage for growth performance, and may be an advantage.

This book documents frontier knowledge on the drivers of agriculture productivity to derive pragmatic policy advice for governments and development partners on reducing poverty and boosting shared prosperity. The analysis describes global trends and long-term sources of total factor productivity growth, along with broad trends in partial factor productivity for land and labor, revisiting the question of scale economies in farming. Technology is central to growth in agricultural productivity, yet across many parts of the developing world, readily available technology is never taken up. We investigate demand-side constraints of the technology equation to analyze factors that might influence producers, particularly poor producers, to adopt modern technology. Agriculture and food systems are rapidly transforming, characterized by shifting food preferences, the rise and growing sophistication of value chains, the increasing globalization of agriculture, and the expanding role of the public and private sectors in bringing about efficient and more rapid productivity growth. In light of this transformation, the analysis focuses on the supply side of the technology equation, exploring how the enabling environment and regulations related to trade and intellectual property rights stimulate Research and Development to raise productivity. The book also discusses emerging developments in modern value chains that contribute to rising productivity. This book is the fourth volume of the World Bank Productivity Project, which seeks to bring frontier thinking on the measurement and determinants of productivity to global policy makers.

"The assessment builds on the work of the Livestock, Environment and Development (LEAD) Initiative"--Pref.