Introduction High service costs remain a critical barrier to agricultural mechanization for smallholder farmers in developing countries. While existing literature focuses predominantly on the demand side, service prices are fundamentally shaped by supply-side efficiency and market structure. This study shifts the analytical lens to service providers, examining how cross-regional agricultural machinery services (CRMS) reduce local machinery service prices through supply-side efficiency channels. Methods We employ two complementary original datasets from China: an unbalanced village-level panel of 265 villages across Jilin, Jiangsu, and Sichuan provinces (677 village-year observations; 2003–2018), and cross-sectional data from 187 machinery service providers. Using two-way fixed-effects and instrumental variable models, combined with propensity score matching (PSM), we identify a complete “efficiency-to-price” transmission chain. Results and discussion Three findings emerge. First, a one-percentage-point increase in CRMS market share reduces local harvesting service prices by 0.07–0.29 RMB per mu. Second, this price-reducing effect is amplified in regions with greater farming season flexibility, where relaxed operational constraints enable more efficient routing and intensify provider competition. Third, CRMS providers exhibit significantly higher total factor productivity (TFP) than within-region counterparts—an advantage robust to self-selection correction—indicating that spatial and temporal scale economies are directly converted into pricing advantages. Conclusion These results reveal, for the first time, that organizational innovation in service provision raises provider TFP, which in turn lowers market prices and broadens smallholders’ access to mechanization. Policymakers in developing countries should prioritize fostering CRMS markets and regional service information platforms as a fiscally sustainable alternative to direct machinery subsidies.
Xu et al. (Tue,) studied this question.