Does agricultural mechanization increase risk exposure for smallholder rice farmers? Evidence from Central China

Stable grain production is essential for global food security, yet is increasingly undermined by climate volatility and resource constraints. While agricultural mechanization has been widely demonstrated to enhance crop yields, its implications for exposure to production risks, particularly across different mechanization choices, have not been sufficiently examined. This study examines how three farm machinery choices – self-owned machinery, outsourced machinery services, and their combined use – affect expected yield, yield variance, and downside risk (the risk of crop yields falling below expected levels) in rice cultivation. Using survey data from 659 rice farmers in Central China and applying an instrumental variable approach to address endogeneity, we find that outsourced machinery services significantly increase yield variance and exposure to downside risk compared with self-owned machinery. These effects are heterogeneous, varying systematically with farm size and farmers’ information acquisition capacity. The findings offer novel empirical evidence on the risk exposure associated with alternative farm machinery choices, yielding important policy implications for agricultural risk management. Specifically, promoting service quality and operator training can reduce moral hazard and transaction risks, while real-time information-sharing platforms improve service timeliness and address supply-demand mismatches, together enhancing productivity and reducing risk in smallholder farming systems.