China's New Rural Income Support Policy: Impact on Grain Production and Rural Income Inequality
AbstractThe impact of China's new rural income support policy and recent price trends on grain production and rural income inequality is assessed for two villages with different degrees of market access in Northeast Jiangxi Province. Two village-level general equilibrium models are used to analyze household decision making and interactions between households within these villages. Parameter estimation and model calibration is based on data collected during an extensive survey held in these villages in the year 2000. The household classification used in these models allows us to draw conclusions that are relevant for many other villages and regions in China. Simulation results show that the income support policy does not reach its goal of promoting grain production. The increased incomes allow farm households to buy more inputs for livestock production, which is a more profitable activity. Moreover, because leisure is valued higher with increasing incomes, farmers tend to switch to less intensive rice production. Selling of rice outside the villages declines more than rice production due to the higher own consumption of households. We further find that agricultural tax abolition has a much larger impact on incomes and production than the direct income support in 2004. Both measures tend to reduce income inequalities within villages, because the richest household groups (who are more involved in off-farm employment) benefit less. Tax abolition, however, tends to widen income inequalities between villages, because the absolute income gain is much larger in relatively rich villages. The switch from rice production towards more profitable activities like livestock production is therefore much stronger in these villages.
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Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25625.
Date of creation: 2006
Date of revision:
income policy; grain production; income inequality; villages; CGE model; China; Consumer/Household Economics; Crop Production/Industries; O20; Q12; R15;
Other versions of this item:
- Nico Heerink & Marijke Kuiper & Xiaoping Shi, 2006. "China's New Rural Income Support Policy: Impacts on Grain Production and Rural Income Inequality," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(6), pages 58-69.
- O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
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Working Papers in Economics
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