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The Impacts Of Self-Sufficiency Policies And Fiscal Decentralization On The Efficiency Of Grain Production In China

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  • Estrin, Andrew J.
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    Abstract

    This paper tests the hypotheses that grain self-sufficiency policies and fiscal decentralization result in inefficiency in grain production in China. Households supply grain in order to comply with self-sufficiency policies rather than to maximize profits. This raises the possibility that grain production is inefficient - especially where the opportunity costs are high (Turner, Brandt, and Rozelle). In addition, fiscal decentralization results in inefficiency in low-income provinces where the small A multiple output distance function is used to derive expressions for a stochastic production frontier and economic inefficiency. Provincial level data for grain and rural industrial output are used in the analysis and local fiscal expenditures and revenues are used as explanators of inefficiency. The expressions are estimated simultaneously using maximum likelihood techniques. The findings suggest that grain production in China could be made more efficient by: 1.) policies that encourage production according to comparative advantage rather than grain self-sufficiency and, 2.) fiscal reforms that increase the responsibility of the central government for agricultural investment.

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    File URL: http://purl.umn.edu/21610
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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 1999 Annual meeting, August 8-11, Nashville, TN with number 21610.

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    Date of creation: 1999
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    Handle: RePEc:ags:aaea99:21610

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    Related research

    Keywords: China grain efficiency; Agricultural and Food Policy; Productivity Analysis;

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    1. Huang, Jikun & Rozelle, Scott, 1996. "Technological change: Rediscovering the engine of productivity growth in China's rural economy," Journal of Development Economics, Elsevier, vol. 49(2), pages 337-369, May.
    2. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    3. Jirong Wang & Eric J. Wailes & Gail L. Cramer, 1996. "A Shadow-Price Frontier Measurement of Profit Efficiency in Chinese Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(1), pages 146-156.
    4. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
    5. Xiao-Yuan Dong, 2000. "Public investment, social services and productivity of Chinese household farms," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 100-122.
    6. repec:rpp:wpaper:9605 is not listed on IDEAS
    7. Huang,Yiping, 1998. "Agricultural Reform in China," Cambridge Books, Cambridge University Press, number 9780521620550, October.
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