Rental Markets of Farm Capital Goods: Its Imperfection and Consequences
Rental market of farm capital goods has positive impact on agriculture. However, equity and efficiency of such markets depend on the extent of imperfections in its functioning. This paper examines the possible market power related imperfections and their impact on the rental markets of farm capital goods. The study is based on the field level data collected from three agro-climatic zones of Brahmaputra valley in Assam. The analysis of field study inputs from 232 sample households confirmed the
... resence of imperfections in rental markets of farm capital goods in different forms. One form of imperfection relates to the fact that all the suppliers of farm capital goods are not pure suppliers due to which services of farm capital goods may not be available for hiring-in at the right time. Given the fact that land has been utilised more productively by owner users than pure hiring-in users also reveal imperfection in rental markets of farm capital goods. Although market power is found to be insignificant in determining rental rates, some other forms of imperfection of rental markets of farm capital goods were observed. For instance, possibility of nonavailability of farm capital goods for hiring-in at the required time in study locations as all the surveyed suppliers (who constituted all or some proportion of total suppliers) were user sellers. Another form of imperfection observed was that owner users were more mechanised than the pure hiring-in users in terms of ploughing operation. Further, with respect to production and productivity enhancing practices, owner users were ahead of pure hiring in users. However, impact of these observed imperfections were found to be statistically insignificant. Thus, imperfections were there in rental markets of agricultural capital goods but without any sever impact on hiring-in users. The results of TOBIT and Log-linear regressions depict that while market power of suppliers had no role in determination of rental rates, observed advantages of owner users over pure hiring-in users were insignificant.