Growths of mechanization service supply have been considered generally
frictionless outside Africa South of Sahara (SSA). However, the dominance of large
tractors that are sparsely populated in SSA countries like Nigeria today suggests
significant imperfections in tractor hiring service market due to technology
indivisibility and low spatial mobility. Empirically testing market imperfections for
scale-biased technologies like tractors has been challenging, partly due to the
difficulty of separating the effect of marginal technology adoptions from intensive
technology adoptions that potentially generate scale effects. We fill this knowledge
gap by applying covariate matching, ordinary propensity score matching, as well as
generalized propensity score matching methods to Nigerian household data. Tractor
hiring service market in Nigeria is found imperfect, potentially due to the supply-side
constraints. The effect of this imperfection is also sizeable; in the case of Nigeria,
overcoming this imperfection can potentially increase farm households’ income by as
much as 30%. This effect is from the marginal adoption of tractors alone, even
without the potential scale effects from intensive tractor use upon adoption.