Smallholder farmers' willingness to pay for scale-appropriate farm mechanization: Evidence from the mid-hills of Nepal

Abstract

This paper analyzes smallholder farmers' willingness to pay (WTP) for the purchase of scale-appropriate farm mechanization in the hill ecologies of Nepal using the case of mini-tiller technology: a small, 5–7 horsepower two-wheel tractor primarily used for agricultural land preparation. Using primary survey data from 628 randomly-selected households, we find that farm size, local wage rates, out-migration, access to credit services, and associations with agricultural cooperatives positively influence the WTP for mini-tillers while the number of draft animals owned negatively influence the WTP for mini-tillers. On average, farmers were willing to pay 31% less than the actual price of a mini-tiller. Results also exhibited a heterogeneous demand in which the lowest quartile farm size households, typically the poorest farm households, were willing to pay 26% less for the mini-tiller than the top quartile of farms. In the context of labor scarcity and rising rural wages, agricultural policy on farm mechanization in Nepal should aim to prioritize small farms through robust service provision models in order to increase the level of farm mechanization in the country.