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Market and Welfare Impact Assessment of the Target Price-Based Subsidy Program in the Chinese Cotton Market

Author

Listed:
  • Linmei Shang

    (Institute for Food and Resource Economics, University of Bonn)

  • Yaghoob Jafari

    (Institute for Food and Resource Economics, University of Bonn)

  • Thomas Heckelei

    (Institute for Food and Resource Economics, University of Bonn)

Abstract

The Chinese pilot target-price-based subsidy program (TSP) on the cotton market in Xinjiang region started in 2014 and is regarded as an effective policy, motivating cotton farmers and reducing cotton imports. This paper develops and applies a partial equilibrium model of the cotton market with regional details and linkages to the rest of the world to quantify the market and welfare impacts of a nationwide TSP. The results show a significant increase in domestic output and decrease in imports without significantly reducing current national welfare as long as the target price does not go below 120 percent of market price. In addition, measures that restrict the release of cotton stock to the domestic market would help the government in reaching its objective of supporting cotton farmers and reducing import.

Suggested Citation

  • Linmei Shang & Yaghoob Jafari & Thomas Heckelei, 2020. "Market and Welfare Impact Assessment of the Target Price-Based Subsidy Program in the Chinese Cotton Market," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 17(1), pages 53-70, June.
    • Handle: RePEc:sag:seajad:v:17:y:2020:i:1:p:53-70
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    More about this item

    Keywords

    China’s cotton market; target-price-subsidy; welfare analysis; partial equilibrium;
    All these keywords.

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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