Effects of tractor ownership on returns-to-scale in agriculture: Evidence from maize in Ghana

Abstract

Agricultural transformation process around the world has often accompanied the rise in returns-to-scale (RTS). While tractor ownership is often associated with greater RTS in agriculture, whether the tractor ownership actually causes such increase in RTS has not been formally tested in the literature. We bridge this knowledge gap, using a unique survey data of tractor owning farm households in Ghana. We find that owning tractors significantly increases the RTS in maize production on the households’ largest mono-cropped plot, and weakens inverse-relationship between land productivity and farm size. This is partly achieved through the rise in the “RTS in tillage production” (the amount of tillage conducted), rather than the RTS in maize production given a fixed amount of tillage produced. These sets of evidence are obtained by addressing jointly the multiple sources of endogeneity of tractor ownership, tractor values, tillage production, and other inputs used.