We established earlier that the distribution of land is highly unequal in Pakistan and that tenancy has been in steep decline. Past attempts at land reform have not been successful. These trends have been facilitated by machinery prices.

A World Bank comparison of tractor prices in 16 countries in 1985 found that Pakistan and Turkey had the cheapest tractors in the world (in US dollars, at exchange rates used in import transactions). The price per horsepower was $136 in Pakistan, compared with just over $175 in India and Brazil, $200 in Indonesia and Sudan, $212 in Mexico and Egypt, and over $300 in Sub-Saharan Africa. This is partly because tractors imported into the country as completely knocked down kits were subject to relatively low import charges of 10 perct, and are assembled in a competitive industry.

However, unequal access to credit and mechanization subsidies could mean that the benefits of low tractor prices are not widely distributed. Interest rtes on machinery remain significantly lower than parity interest rates: up to 40 percent lower in 1991. While Longmire and Debord show that tractor prices have been slightly above world prices in recent years, it is possible that other countries have decided that even higher tractor prices were desirable to avoid undue increases in farm size and displacement of tenants.

Research from Pakistan and elsewhere has shown that mechanization has far greater labor-displacing than output enhancing effects. Policy induced lowering of tractor prices led to premature tractorization and labor displacement. While any distortion in factor prices should be avoided, a cheap tractors policy is particularly undesirable for a country such as Pakistan. An economy with abundant rural labor should not have a policy mix that discourages rural employment. Agriculture cannot absorb the entire rural labor force, and some migration is inevitable. However, there are considerable advantages to ensuring that rural urban migration takes place at a controlled rate, and that cities are not overwhelmed by a flood of displaced labor from rural areas.

Some mechanization of Pakistani agriculture was clearly inevitable. Mechanized power reduces the burden of agricultual labor, and when capital intensity is low (as in Pakistan before the Green Revolution), the productivity gains from mechanization are considerable. In addition, the emergence of lucrative work opportunities in Middle Eastern oil markets in the 1970s represented a huge exogenous shock to the Pakistani labor market that lowered rural labor supply, necessitating labor-saving investments. Finally, the intensification in input use that followed the Green Revolution was bound to lead to a rise in complementary inputs, including machinery. However, the rise in mechanization has been particularly rapid (Table 9), relative to the growth of other inputs.

Of course, this alone is not sufficient to establish that mechanization was excessive. Further insight can be gained through production function analysis. This allows us to isolate the productivity contribution of different inputs. Ali and Velasco use time series and district data on different cropping systems to esfimate production functions for Pakistani agriculture. Estimates are presented separately for the l970s and 1980s. (Table 10) 23