Farmers' Exit from Land Operation in Rural China: Does the Price of Agricultural Mechanization Services Matter?

Abstract This study uses data covering 3,914 farm households, collected from Henan province in China, to investigate the links between the price of agricultural mechanization services and farmers' exit from land operation. The results indicate that the increasing price of agricultural mechanization services leads to farmers leaving land operation, especially when the high sunk costs and the long‐term breakeven period of self‐owned machinery are considered. This effect is intensified by the rapid rural–urban migration in China. Further analysis reveals that the surge in service prices reduced land renting‐in and encouraged non‐grain production. Our analysis suggests that the agricultural mechanization service market in China tends to work against the survival of smallholder farmers. However, the price of agricultural mechanization services is conducive to eliminating less‐productive farmers and cultivating new agricultural operators.