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Production efficiency of Chinese agriculture: evidence from rural household survey data

  • Wang, Jirong
  • Cramer, Gail L.
  • Wailes, Eric J.
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    A shadow-price profit frontier model is developed to examine production efficiency of Chinese rural households in farming operations. The model incorporates price distortions resulting from imperfect market conditions and socioeconomic and institutional constraints, but retains the advantages of stochastic frontier properties. The shadow prices are derived through a generalized profit function estimation. The shadow-price profit frontier is then estimated and an efficiency index based on the estimated profit frontier is computed and decomposed to household characteristics. Empirical results using data from China's Rural Household Survey for 1991 reject the neoclassical profit maximization hypothesis based on market prices in favor of the general model with price distortions. Farmers' resource endowment and education influence their response to the market restrictions, thus alter their performance in terms of efficiency. The estimated efficiency index ranges from 6% to 93% with a sample average of 62%. Households' educational level, family size and per capita net income are positively related to production efficiency. Households living in mountain areas or with family members employed by the government or state industries are relatively inefficient. Reducing market intervention, allowing right of use of farm land to be transferred among households, encouraging migration of excess farm labor, and promoting farmers' education will improve rural households' efficiency in agricultural production.

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    File URL: http://purl.umn.edu/173994
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    Article provided by International Association of Agricultural Economists in its journal Agricultural Economics of Agricultural Economists.

    Volume (Year): 15 (1996)
    Issue (Month): 1 (September)
    Pages:

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    Handle: RePEc:ags:iaaeaj:173994
    Contact details of provider: Web page: http://www.iaae-agecon.org/
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    1. 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.
    2. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    3. W, Y, 1995. "Productivity Growth, Technological Progress, and Technical Efficiency Change in China: A Three-Sector Analysis1," Journal of Comparative Economics, Elsevier, vol. 21(2), pages 207-229, October.
    4. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March.
    5. Lau, Lawrence J & Yotopoulos, Pan A, 1971. "A Test for Relative Efficiency and Application to Indian Agriculture," American Economic Review, American Economic Association, vol. 61(1), pages 94-109, March.
    6. Toda, Yasushi, 1976. "Estimation of a Cost Function When the Cost Is Not Minimum: The Case of Soviet Manufacturing Industries, 1958-1971," The Review of Economics and Statistics, MIT Press, vol. 58(3), pages 259-68, August.
    7. Zhang Wenfang & Jack Makeham, 1992. "Recent Developments in the Market for Rural Land Use in China," Land Economics, University of Wisconsin Press, vol. 68(2), pages 139-162.
    8. Atkinson, Scott E & Halvorsen, Robert, 1980. "A Test of Relative and Absolute Price Efficiency in Regulated Utilities," The Review of Economics and Statistics, MIT Press, vol. 62(1), pages 81-88, February.
    9. Lopez, Ramon E, 1985. "Structural Implications of a Class of Flexible Functional Forms for Profit Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 593-601, October.
    10. Kalirajan, K P, 1990. "On Measuring Economic Efficiency," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 75-85, January-M.
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