Land fragmentation and farm productivity in China in the 1990s

The main objective of this study is to examine the effects of fragmentation on farm productivity in China and to discuss policy implications. Some earlier work has questioned the importance of the economic costs of land fragmentation in developing economies. It has been argued that policymakers should focus instead on reducing the root causes of fragmentation: inefficiencies in land, labour, credit, and food markets. Our results, using a more recent and larger dataset from a household survey in China, find that fragmentation does have an economic cost in China. Production functions are estimated for each of the major grain crops in the sample provinces. We also argue that to reduce the economic costs, land consolidation in China should be undertaken with less government intervention. More attention should be given to the establishment of markets for land (or land use rights) and improvements in rural credit and grain markets.     

An alternative method of measuring economic efficiency: The case of grain production in China

The objective of this paper is to suggest a simple method to gauge the economic efficiency of firms, when there are no reliable price data. Applying the suggested method on the recent Chinese farm-household survey data collected during 1993 and 1994, this study shows that majority of grain farmers in China are not producing at the optimum levels which yield maximum profits. The analysis also indicates that output can be increased by consolidating rather than further segmenting the operational area of grains.     

China's grain marketing system reform in 1993–1994: empirical evidence from a rural household survey

By utilizing a rural household survey, this paper domonstrates the progress in China's grain marketing reform in 1993 and evaluates to what extent the reform was reversed in 1994. Specifically, we investigate the degree of commercialization, changes in state's contract procurement quota and changes in the marketing channels. Overall, the grain market has been liberalized to a very large extent. Participation of the private traders have already grown to a significant level, occupying more than one-third of the market share for wheat and rice and more than half for maize. For minor crops, the share of private traders were even bigger. Despite the reversal in 1994, the grain market was still very “open.” Counting all grain types, the state was controlling only about one-third of the marketed surplus. However, if the central leadership perceived any serious instability in the market for a certain grain, examples provided illustrate how the state's control could certainly be strengthened significantly.     

Productivity growth, technological progress, and efficiency change in chinese agriculture after rural economic reforms: A DEA approach

This study applies a data envelopment analysis (DEA) approach to analyze total factor productivity, technology, and efficiency changes in Chinese agricultural production from 1984 to 1993. Twenty-nine provinces in China were classified into advanced-technology and low-technology categories. The Malmquist (1953) productivity measures were decomposed into two components: technical change index and efficiency change index. The results show that total factor productivity has risen in most provinces for both technology categories during the 1984–1993 period. Technical progress was mostly attributed to Chinese agricultural productivity growth after the rural economic reforms. The deterioration in technical efficiency in many provinces indicates China has great potential to increase productivity through improved technical efficiency. Enhancing rural education and research and development (R&D) in agriculture may also help farmers to improve technical efficiency and productivity in agricultural production.     

Poverty and firewood consumption: A case study of rural households in northern China

This paper discusses the determinants of firewood consumption in a poor township in rural northern China, with a special focus on the relationship between households' economic wealth and firewood consumption. We find strong support for the poverty–environment hypothesis since household economic wealth is a significant and negative determinant of firewood consumption. Firewood can therefore be considered as an inferior good for the whole population in the rural area under study, although further evidence shows that at the top of the wealth distribution, there might be a floor effect in the decreasing firewood consumption. Besides economic wealth, our analysis also shows that the own-price effect is important in explaining firewood consumption behavior, the price effect gaining importance with rising incomes. Finally, increasing education is also found to be a key factor in energy consumption behavior, especially when dealing with energy source switching behavior.     

A note on the CERU-MoA grain farm household survey in China

During the period 1994–1995 the Chinese Economy Research Unit (CERU), University of Adelaide, Australia and the Department of Policy, Reform and Law, Ministry of Agriculture (MoA),¹ the People's Republic of China, jointly designed and conducted an annual sample survey of about 1000 farm households in five Chinese provinces: Guangdong, Jilin, Jiangxi, Sichuan and Shandong. The CERU-MoA survey is a part of the ACIAR (Australian Centre for International Agricultural Research) project on China's grain production and marketing during 1994–1996.² Based on this survey a large database has been established which contains cross-household data on population and labour, land, grain production and marketing, food consumption, income and related policy issues.³     

Do Chinese farmers reinvest in grain production?

Grain production is affected by the relocation of farm household labour from on-farm to off-farm activities and by an increase in the investment in grain production as a result of increase in farm household income that occurs along with such a labour shift. This study uses a recent farm household survey data to examine whether Chinese grain households do reinvest in grain production. It has found that household income growth contributes to higher investment in grain production although a higher share of non-agricultural income has a negative effect. The authors' other research has found a negligible direct impact of farm to non-farm labour transfer on grain production. We may conclude that in the near future, the total impact (direct and indirect) of labour transfer from farm to non-farm production on grain output is expected to be positive. In the long run, in may become negative when more and more labour shifts out of grain production and marginal product of labour becomes positive.     

A decomposition analysis of income inequality of Chinese rural households

This paper reports an application of household survey data collected from grain producing areas in five provinces of China to issues of the determinants of rural inequality. Previous studies suggest that non-agricultural activities have been the major cause of rural income inequality, which has important implications for policy formulation. However, our results show that inequality within the grain producing areas was also very high, with differences in crop income as the major source of inequality. The policy implications are also different from those of previous studies. While some suggest that an increase in agricultural income can reduce inequality, our results indicate that this is not universally true. In some cases, whether the increase in crop income has come from state procurement also matters. These results call for a more cautious and area-specific approach to policy formulation as far as inequality is concerned.     

China''s land arrangements and rural labor mobility

Chinese farm families under the Household Responsibility System have the land use-rights but not the rights of alienation. If permanently leaving agriculture, they have to return the land to local authorities and consequently give up a stream of future land earnings. This paper analyzes the deterrent effect of this land arrangement on labor mobility by constructing a household model which considers both part-time farming and permanent migration decisions. The implications of the model are consistent with the recent Chinese experience of rural floating population in cities and the rapid growth of rural nonagricultural employment.     

The impact of agricultural technology adoption on income inequality in rural China: Evidence from southern Yunnan Province

This study analyzes the impact on income inequality of government efforts to increase agricultural incomes in rural China. It collects and analyzes survey data from 473 households in Yunnan, China in 2004. In particular, it investigates the effects of government efforts to promote improved upland rice technologies. Our analysis shows that farmers who adopted these technologies had incomes approximately 15% higher than non-adopters. Despite this relatively large increase, we estimate that the impact on income inequality was relatively slight. This is primarily due to the fact that lower-income farmers adopted the improved rice technology at rates that were roughly equivalent to those of higher-income farmers.     

Incomplete property rights, exposure to markets and the provision of environmental services in China

This paper uses data from a 2003 rural survey to examine the determinants of household provision of environmental services under China's Sloping Land Conversion Program (SLCP), the largest payments for environmental services program in the developing world. The paper examines the determinants of plot-level survival rates of program-planted trees and grasses. It finds that household rights over retired land as well as autonomy in program decision-making (which we argue on the basis of supportive evidence are plausibly exogenous to post-retirement outcomes) have important and potentially countervailing impacts on the provision of environmental services targeted by the program. Households permitted to select what to plant obtain better program outcomes, but do not make the choices that the government would like them to, while those permitted to decide what land to retire perform worse. The analysis also finds that households more vested and experienced in agriculture and with less exposure to off-farm labor markets fare better in managing their planted trees. Significant learning-by-doing effects are also evident, suggesting that greater technical support to farmers could improve outcomes and lower program costs.     

The direct impact of the relocation of farm labour on Chinese grain production

The shift from collective to household-based farming and the move towards a market economy have increased the opportunity cost of grain production and caused a withdrawal of labour from grain farming in China. Since Chinese grain production is important to both China and the world, there are concerns about whether such a farm labour relocation will have a destructive impact on China's grain production. The previous production function studies ignored the effects of changes in labour quantity and quality on grain production. Using recently available sample survey data on Chinese farm households, this paper incorporates production function analysis with human capital analysis to examine the direct impact of the relocation of farm labour on China's grain production. It has found that the relocation of farm labour has not harmed the Chinese grain production in general, but its impact varies across regions with different factor endowments that affect the choice of farming technology.     

Are China's energy markets cointegrated?

The paper investigates energy price co-movement over the period 01/1999–12/2005 for China as a whole, and over sub-periods and for seven regions, using panel unit root and panel cointegration tests developed by Pedroni (1999, 2004). The results suggest that not all energy sources are spatially homogenous in prices and the processes of energy price cointegration are different over sub-periods; over groups of fuels; and over regions. Coal and electricity prices have co-moved since 2003 while gasoline and diesel prices have co-moved since 1997. The results show that there are clearly variations in the emergence of energy price co-movement over regions, implying that regional fuel markets have emerged in China. Important lessons that can be learnt from the results are that an energy market has, to some extent, already emerged in China and, as a result, energy prices are substantially less distorted than before. If correct, these findings have significant global implications both in terms of future emission reductions, emission trading and trade negotiations where China should be treated as a ‘market driven economy’.     

Decomposition of the increase in earnings inequality in urban China: A distributional approach

This study examines changes in Chinese urban income distribution from 1987 to 1996 and 1996 to 2004 using nationwide household data and investigates the causes of these changes. The Firpo, Fortin, and Lemieux (2007, 2009) method based on unconditional quantile regressions is used to decompose changes in income distribution and income inequality measures, such as variance and a 10:90 ratio. The decomposition results show that wage structure effects, such as a widening gender earnings gap, increases in returns to college education, and increases in earnings differentials between industries, company ownership types, and regions, have been the major contributors to the overall increases in income inequality. It was also found that at different points on the income distribution (e.g., the lower or upper half), the contributing factors that increase income inequality are different.     

Rural to urban land conversion in China — How large is the over-conversion and what are its welfare implications?

The current system of converting farmland to urban land use in China can be characterized as a hybrid system that combines government controls with market-based transfers. In this paper we argue that this hybrid governance structure causes an over-conversion of farmland from the rural to the urban sector, as compared to a competitive market situation, and a welfare reallocation that discriminates against farmland owners. We develop a partial equilibrium model that can be used to examine the impact of the current hybrid governance structure on the over-conversion of farmland and to analyze the welfare changes for different groups of actors and the resulting net social welfare loss. Using a dataset with detailed information on farmland acquisitions and urban land transactions in Yingtan City in Jiangxi Province, we illustrate how this framework can be applied. Our results indicate an over-conversion of 33.5% of the total converted farmland in this city between 1999 and 2003. The welfare of farmland owners affected by the conversion decreased by 1.38 billion RMB, while the net social welfare loss equaled more than 270 million RMB during the same period. The local government obtained 380 million RMB of revenues by re-selling farmland as urban land through competitive conveyance mechanisms between 2002 and 2005, while the manufacturing sector gained an estimated 280 million RMB from buying land use rights at relatively low prices. We conclude that the current policy of increasing urban land conveyance through competitive mechanisms does not address two major underlying causes of over-conversion, and that protection of farmland would be better served by replacing the current hybrid rural to urban land market structure by a competitive land market.     

Land use change and environmental stress of wheat, rice and corn production in China

Grain self-sufficiency is one of the most important agricultural policy goals in China. With only modest imports, China has succeeded in feeding 22% of the world's population on only 7% of its land. However, a high price has been paid for this enormous achievement. Increase in grain yields, in particular in rice, as the main source of production growth, relied heavily on intensive use of physical inputs and increasing intensity of farming systems. Soil degradation, water scarcity, and severe pollution were among the consequences as well as declining efficiency of fertilizer application. Using county-level panel data from 1980 to 2003 and graphical (GIS-based) analysis, this paper first looks at the spatial change of the major grain production across regions over the past two decades, towards the northern and northeastern provinces. The analysis is complemented by using a random panel data model, which underscores the significant influence of land availability, degree of urbanization, and government policy on grain production. Finally, this analysis addresses environmental stress which includes both soil degradation and water shortage. The latter is already severe in many of the traditional grain producing areas, but will now become a bigger problem in the “new” grain producing areas, as these have traditionally much less water resources. Hence, while the economic rational of the “grain shift” towards the northern and northeastern regions is understandable, its sustainability is not guaranteed.     

Chinese wool auctions: Failed agribusiness reform or future marketing channel?

The spectacular though short-lived operation of China's wool auctions graphically illustrates problems in reforming China's agribusiness sector. A selective coverage of product type and participants, a highly contrived process of price discovery, and an urgent need for parallel reform in related areas all led to the demise of the auctions and are a barrier to their re-emergence as a viable wool marketing channel. Despite the challenges facing wool auctions, this paper argues that they still have much to offer the marketing of wool in China.     

Understanding openness and productivity growth in China: An empirical study of the Chinese provinces

This paper investigates the effects of openness on China's regional productivity growth. We build a model of technology diffusion in which follower economies achieve productivity growth by taking advantage of technology spillovers from the world technology frontier. We hypothesize that China's regional productivity growth is a positive function of regional openness and a negative function of the current level of regional productivity. Empirical analysis in this paper focuses on how openness affects productivity growth in the Chinese provinces. We examine two effects of openness on regional productivity growth in China: the direct growth effect and the convergence effect. By using a variety of panel data regression techniques, we show that the direct growth effect of openness is the main effect while the convergence effect is insignificant. The findings of this paper lend strong support to the claim that the opening-up of China promotes the country's economic growth.     

Migration constraints and development: Hukou and capital accumulation in China

Rural–urban migration flows are a crucial corollary of economic development. The adverse or beneficial effects of internal migration, for sending as well as receiving areas, and the definition of optimal migration policies, have remained much discussed issues since the seminal works of Harris and Todaro (1970). This debate is especially acute in China where the “household registration system” (hukou) acts as a strong constraint on individual migration. This paper aims to assess the consequences of hukou through a simple model of a developing dual economy with overlapping generations. Contrary to existing studies focused on the contemporaneous allocation of economic resources, it deals with the dynamic consequences of migration flows and migration policies. It shows that, in fairly general circumstances, hukou-related migration constraints can actually hasten development, understood as the transfer of the labor force to the modern sector, driven by capital accumulation. The hukou system could thus be one of the causes of the extremely high Chinese saving rate and of the high pace of Chinese development. Insights from the model are confronted with stylized facts from the Chinese development, and theoretical results are especially consistent with the effects of the 2001 “towns and small cities” reform.     

Money demand in China and time-varying cointegration

Many studies analyze the money demand using a (fixed coefficient) cointegrating regression model, which may not be appropriate to deal with the money demand of a transition economy like China. This paper investigates this issue using a time-varying cointegration approach based on the quarterly data from 1996 to 2009. We find some interesting results: (i) the estimates of the income elasticities are between 0.60 and 0.75, which are comparable with the previous studies; (ii) the estimated interest rate elasticity supports the argument that the overall effect of the interest rate on the money holding is weak although there are some mild evidences that it has been strengthened in recent years; (iii) the substitution effect of equity asset dominates the wealth effect, especially, during the bullish market period. Our result is robust to the alternative choices of the scale or opportunity cost variables and shows that omission of the stock prices in the money demand function would possibly yield a misspecification problem.