Price policy, irreversible investment, and the scale of agricultural mechanization in Egypt

Abstract

Egyptian farmers responded to migration-induced labor shortages in the 1970s and 1980s by mechanizing many agricultural operations. Tractor subsidies encouraged this process. After the mid-1980s, wages and employment fell steadily and remained low throughout the 1990s, but agriculture remained mechanized. This paper traces the process by which economic policies and technical indivisibilities locked Egypt into tractor-based mechanization even though economic analysis suggested that smaller scale machines were more profitable to farmers and generated more employment. A linear programming model is used to analyze both the determinants and dynamic implications of tractor adoption.

Citation

Kerr, J. (2003), "Price policy, irreversible investment, and the scale of agricultural mechanization in Egypt", Food, Agriculture, and Economic Policy in the Middle East and North Africa (Research in Middle East Economics, Vol. 5), Emerald Group Publishing Limited, Leeds, pp. 161-185. https://doi.org/10.1016/S1094-5334(03)05011-8