IDEAS home Printed from https://ideas.repec.org/a/ags/cafric/45701.html
   My bibliography  Save this article

Implicit Contracts and the Grey Market for Fertilizer in China

Author

Listed:
  • Fulton, Murray E.
  • Giannakas, Konstantinos
  • Yunlai, Xiao

Abstract

A common occurrence in many countries is that policy outcomes differ from the official objectives of the policy directives. A good example can be found in China. In 1994, the fertilizer market in China underwent a significant change. In response to strong complaints from farmers in a number of regions about shortages and substantial price increases, the central government set the markup rate for fertilizer as it moved from fertilizer plants to farmers and granted the Agricultural Means of Production Corporations(AMPCs) a monopoly role as the supplier of fertilizer. The results of the 1994 policy reforms were not as expected. Controls on maximum retail prices failed to produce the desired effect and prices for agricultural inputs continued to increase by large margins. In both 1995 and 1996, the actual fertilizer price greatly exceeded the government-mandated price (Xiao, 1998). Nor did enterprises fully follow the controls in other respects. Some broke the allowed limit of 10 percent for products to be sold directly by fertilizer producers, and some trading agencies overcharged by adding more transport and handling expenses than were allowed (Zhou, 1996; Zhang and Ji, 1995; MOA,1996). In addition, although the AMPCwas to be the sole trader, the private traders in many provinces continued to play a significant role – the market share of the private traders ranged from approximately 5 percent in Yunnan province to nearly 25 percent in Shaanxi (Xiao, 1998). Thus, while private trading was not officially sanctioned, a well-defined grey market clearly existed in which private dealers purchased fertilizer from the AMPC and retailed it to farmers.

Suggested Citation

  • Fulton, Murray E. & Giannakas, Konstantinos & Yunlai, Xiao, 2003. "Implicit Contracts and the Grey Market for Fertilizer in China," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 04.
  • Handle: RePEc:ags:cafric:45701
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/45701
    Download Restriction: no

    References listed on IDEAS

    as
    1. Konstantinos Giannakas & Murray Fulton, 2000. "Efficient Redistribution Using Quotas and Subsidies in the Presence of Misrepresentation and Cheating," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 347-359.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agricultural and Food Policy;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:cafric:45701. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/caefmea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.