Reforms, Incentives, Welfare and Productivity Growth in Chinese Wheat Production

Vasita Patel and Sheikh Selim ()

No E2010/16, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: Following the rural reform in 1978 a series of agricultural reforms were introduced in China with an aim to create incentives for the farmers to produce more. The nineties. price reform that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production,this apparently motivated the government to take over the control of agricultural prices in 1998. For a dataset that covers all the major rural reforms undertaken in China, we examine how and to what extent these reforms affected the productivity and welfare of wheat farmers in China. We find that the nineties. price reforms resulted in a high magnitude of effort-response from wheat farmers which led to a faster growth of the incentive component of productivity. Due to random weather shocks this response did not result in the expected level of profit and as a result the farmers suffered a decline in welfare. The regulations introduced in 1998 destroyed the incentive-induced growth in TFP. In general wheat farmers in China responded highly when markets were made more competitive, and their effort-response for flat subsidies (e.g. the ones introduced in the eighties) was very marginal.

Keywords: China; Incentives; TFP; Agriculture; Wheat Production (search for similar items in EconPapers)
JEL-codes: N55 O13 O53 Q12 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-12, Revised 2011-01
New Economics Papers: this item is included in nep-agr, nep-eff and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2010/16

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