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Abstract

Using a recent data set from farm households in the provinces of Hebei and Shandong, we investigate the effect of land fragmentation on machinery use as well as the effect of machinery use on crop production. Endogeneity is addressed by utilizing land fragmentation due to previous long-term land assignment as an instrument and first difference estimation between normalized wheat and corn output from the same plots in the same year. The main results indicate that consolidating an average farm of 0.31 hectares from 2.28 plots to one plot increases machinery use by about 10%. Further, a 10% increase of machinery use increases crop production between 0.5% and 1%.

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