Abstract/Summary:
This paper looks at the effect of labour movement on farm mechanisation in rural Cambodia. The study focuses on labour movement from on-farm towards off-farm jobs, and uses investment in agricultural machinery as a proxy for farm mechanisation. Statistics show that in recent years there has been a huge outmigration from rural areas. This has had significant impacts on farming practices across the country. Farmers can no longer depend on a ready supply of labourers, which in turn necessitates more investment in agricultural machinery to maintain production and productivity. Our results are robust to checks around omitted or unobserved variable bias. Using farm wage as the instrumental variable, ivtobit regression analysis indicates that increased off-farm employment has a statistically significant positive effect on the rate of investment in agricultural machinery. Households whose members work off-farm are more likely to make investments in agricultural machinery as a direct substitute for labour. Simply put, an increase in the number of household members working off-farm induces farmers to invest more in agricultural machinery, the core factor contributing to the success or failure of agricultural mechanisation.

English