Technology adoption is essential for improving agricultural productivity in Sub-Saharan Africa. However, imperfect land markets limit farmers’ ability to capture returns to scale associated with large capital inputs such as tractors, contributing to persistently low levels of agricultural mechanisation. Equipment rental markets have the potential to overcome these capital indivisibilities and expand access to mechanisation, but there are various demand and supply side barriers. Yet, very little is known about why sharing and rental arrangements remain underdeveloped. The recent rise in digital services in agriculture, driven by widespread mobile phone and internet adoption, may help reduce transaction costs and thus offer the opportunity to study relevant barriers. This project asks: Can digital technology expand access to mechanisation by making tractor rental market more efficient? What are the effects of more efficient tractor use on productivity and processes of structural transformation?
The project studies these questions in the context of private tractor rental markets in Kenya. Leveraging unique GPS tractor mobility data from a new and rapidly expanding monitoring and fleet management app for tractor owners, it evaluates the impact of digital technology on agricultural mechanisation and productivity using a quantitative economic model. In particular, the project combines the proprietary tractor activity records with its own farmer survey, satellite data and existing household surveys to provide micro-level evidence on the effects of interest, quantify the reduction in transaction costs and empirically test model predictions.
Agricultural mechanisation has long been a policy goal in Sub-Saharan Africa, where progress is lagging behind the rest of the world. Many recent unsuccessful policies have focused on subsidising tractor purchases without addressing potential underlying market failures in their shared use. This project offers new insights into these constraints, informing the design of interventions to improve mechanisation access for smallholder farmers in Kenya and similar agricultural contexts, while highlighting the potential of scalable digital tools for both private and public actors. Additionally, the project contributes to the academic literature on agricultural technology adoption, providing new evidence on the effects of digital monitoring and the role of capital rental markets in developing countries.
