Tractor Rental Services In Kenya: Understanding Mechanization and Changes in Agricultural Production among Smallholder Farmers

Abstract

Tractor Rental Services In Kenya: Understanding Mechanization and Changes in Agricultural Production among Smallholder Farmers John Mburu Mukundi Abstract Tractor rental services provide a pathway for smallholders, particularly those faced with limited financial resources, to access mechanization. This study examines the impact of tractor rental service operations nearby on tractor use and agricultural production among Kenyan smallholders. The study uses data a private tractor rental company, soil property profiles at a 250-meter resolution and small scale farmers' household survey data from Kenya Climate Smart Agriculture Project (KCSAP) and the National Agricultural and Rural Inclusive Growth Project (NARIGP). An instrumental variable approach is employed to address potential endogeneity arising from unobserved factors that affect both the nearby tractor operation (within a 10km, 15km, and 20km radii) and the household production decisions, including tractor use. Specifically, we use soil pH, cation exchange capacity (CEC), slope, and organic carbon content surrounding households as instrument variables for tractor rental activities nearby. We exclude the sub county grids where the household is located and average these variables at the county level to exploit variation that affect nearby tractor rental service use but are unrelated to individual decision to use tractors. First-stage regression results confirm that soil characteristics are strong instruments. Second-stage results, estimated with county-year fixed effects, show that proximity to tractor rental services significantly increases tractor usage, underscoring the importance of accessibility in mechanization adoption. Greater access to tractor services is linked to larger farm sizes and reduced crop diversity, reflecting a shift toward mono-cropping driven by high-value crops or mechanization constraints, a characteristic of extensive farms. Proximity to tractor services reduces crop production costs, indicating operational efficiency, but does not consistently raise revenue per acre. Maize yields decline while bean yields rise, highlighting crop-specific effects. These dynamics are most evident in regions with large tracts of land, where mechanization is more feasible. Tractor access increases both men's and women's participation in agriculture, particularly empowering women. Overall, mechanization holds promise for productivity and social inclusion, provided access is equitable and agronomic needs are met.