Investigating the “One Farm Household, Two Production systems” in Rural China: The Case of Vegetable and Fruit Farmers

Food safety receives an escalating attention since the 2008 milk scandal in China. Chinese government faces a great challenge to safeguard the safety of food supply chain due to the significant fermentation of producers and weak institutional resources to monitor and enforce food safety standards. Chinese farm households often practice two separate production systems for the same crop for the market and self-consumption separately and, thus the so called “One Farm Household, Two Production Systems” (OFH-TPS) gain the popularity in the recent years. This study provides both a theoretical framework to model the OFH-TPS decision and an empirical analysis to identify factors affecting the OFH-TPS decision using household survey data. We find that information asymmetry of product quality and measures to reduce the asymmetry such as product inspections and certifications play an important role in the OFH-TPS decision. In particular, product inspections conducted by industry associations, agricultural cooperatives, or farmer themselves curb the adoption of the TFH-TPS, whereas government inspection has no statistically significant effect. Farmers who sell green foods are less likely but organic farmers are more likely to adopt the OFH-TPS, which echoes the expectation based on the theoretical model. We also find that training of pesticide applications reduce the adoption of the OFH-TPS, but the perceived adverse effects of pesticide applications have no statistical effects. Furthermore, farmers who uses highly toxic and banned pesticides and/or who perceive poor food safety of the local markets are more likely to adopt the OFH-TPS. This study provides rich policy implications. First, calling the engagement of private sector to safeguard food safety and improving the efficacy of government inspection are critical to improve food safety. Second, education on pesticide applications is critical, especially among retailers of pesticides.