Does household engagement in concurrent business affect the farm size-technical efficiency relationship in grain production?

Min Zhong, Yuchun Zhu, Qihui Chen (), Tianjun Liu and Qihua Cai

China Agricultural Economic Review, 2018, vol. 11, issue 1, 125-142

Abstract: Purpose - The purpose of this paper is to examine how households’ engagement in concurrent business (CB), which is measured by the contribution of off-farm income to household income, affects the farm size–technical efficiency (TE) relationship in Northern China. Design/methodology/approach - This paper applies a stochastic frontier analysis method to analyze data on 1,006 rural households collected from four major wheat-producing provinces in Northern China, adopting a translog specification for the underlying production function. Findings - The analysis yields three findings. First, the farm size–TE relationship is inverted U-shaped for all CB engagement levels higher than 5 percent, and the most technically efficient farm size increases with the level of household CB engagement. Second, how TE varies with the level of CB engagement depends on farm size: an inverted-U relationship for relatively small farms ( 20μ). Finally, the overall TE score, 0.88, suggests that wheat output can be increased by 12 percent in Northern China if technical inefficiency were eliminated. Originality/value - Unlike most previous studies that examine the impacts of farm size and households’ off-farm business involvement separately, this paper examines how these two factors interact with each other.

Keywords: Technical efficiency; Rural China; Concurrent business; Farm size; Stochastic production frontier; J21; Q15 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:caerpp:caer-11-2016-0179

DOI: 10.1108/CAER-11-2016-0179

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