The incentive problem and the demise of team farming in China

This paper begins with a discussion of what can be inferred about the efficiency of collective farming from the demise of team production in rural China. After reviewing the formal literature on incentives in collective farms, it examines two problems that may have plagued the Chinese teams: first, excessive egalitarianism, which can be analyzed by modifying existing models, and second, monitoring problems, which require a departure from the perfect information context of those models. By numerical example, it is shown that the superiority of household farming over forced collective farming does not preclude the possibility that some team production would have existed in a democratic equilibrium dominating both of them. Finally, the post-reform household contracting system is examined with special reference to distributive and allocative issues.