Farm Labor Productivity and the Effect of Mechanization

There is a chronic shortage of agricultural labor in the US. While growers are increasingly turning to guest-worker programs to meet their labor needs, few regard immigrant workers as a viable long-term solution. Further, many producers of labor-intensive agricultural commodities are considering mechanized solutions, the slow rate of adoption of mechanized harvesting equipment in the US remains an empirical puzzle. In this paper, we demonstrate that wage-setting farmers have an incentive to "over-mechanize," or employ more than the cost-minimizing level of capital when capital and labor are substitutes, but "under-mechanize" when labor and capital are technical complements. To test this theory, we estimate the marginal value of augmenting labor with non-autonomous harvesting aids on a large strawberry farm in Central California using an econometric model of peer-affected productivity that controls for the group performance of farm workers operating in crews. Our findings indicate that mechanical aids complement labor in strawberry production, an outcome that helps explain the persistent productivity gap between agricultural and non-agricultural industries, and why the adoption of mechanization has been relatively slow. We confirm the broader implications of our theory for the apparent slow adoption of mechanical harvesting technologies in US agriculture by comparing general wage trends across several labor-intensive and non-labor-intensive industries in California