The pattern of grain production in northwestern Shandong today is a combination of machinery and labor. The mechanization of plowing, sowing, and harvesting has freed “principal labor units” (i.e., males in their prime) from agriculture, while the relatively labor-intensive operations of applying fertilizer and agricultural chemicals (pesticides and herbicides) and watering still mainly rely on “auxiliary labor” (i.e., women and the elderly), which remains abundant in the countryside. The principal family laborers of households with small farms can thus pursue off-farm work, while auxiliary family labor, which has a lower opportunity cost, can still do the farming and ensure the output of grain. Large farms on the other hand have no incentive to introduce labor-saving machinery to take over what have been labor-intensive operations as long as cheap auxiliary labor is still plentiful. Thus large farms do not have a higher level of mechanization; however, they do have a totally different managerial logic. Their production is driven by capital, which is invested in acquiring land (through land transfers), hiring wage labor, and pursuing profit. In contrast, production in small farms is driven by the family’s labor, pursuing the best division of work between principal and auxiliary family labor and the maximum output per unit of land. The land scarce–labor abundant reality of China requires that agriculture pursue higher output, larger product value, and higher net returns on each unit of land. It is small farms that best meet these requirements.

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