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Factor reallocation and structural transformation implications of grain subsidies in China

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  • Wang, Can
  • Deng, Mengzhi
  • Deng, Junfeng

Abstract

Since agriculture has contributed significantly to China’s economic growth miracle, it is important to understand the contributions and determinants of agriculture related to different agricultural policies in structural transformation in China. However, as one of the most important agricultural policies in China, the effects of the grain subsidy policy on factor reallocation, economic growth, as well as agricultural and non-agricultural production have not been investigated systematically and comprehensively. The absence of using an economy-wide model to estimate the impacts of the grain subsidy policy in China leaves a vacuum in the policy-advising space. This research develops a dynamic single-country, multi-regional computable general equilibrium model of the Chinese economy to evaluate the historical impacts of the grain subsidy policy. Our results reveal that grain subsidies impede the efficiency of factor reallocation and economic structural transformation in China. However, grain subsidies promote grain production growth and temporarily reduce rural-urban income disparity. In order to achieve the long-term sustainable increase in rural income and to mitigate the rural-urban income gap, China needs to further develop its labor-intensive industries (e.g., services) to accommodate the large number of rural labor transfers. Moreover, the large-scale agricultural production and technology improvement in agriculture are the effective measures to ensure food security in China.

Suggested Citation

  • Wang, Can & Deng, Mengzhi & Deng, Junfeng, 2020. "Factor reallocation and structural transformation implications of grain subsidies in China," Journal of Asian Economics, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:asieco:v:71:y:2020:i:c:s1049007820301287
    DOI: 10.1016/j.asieco.2020.101248
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    Cited by:

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    2. Kimsanova, Barchynai & Herzfeld, Thomas, 2022. "Policy analysis with Melitz-type gravity model: Evidence from Kyrgyzstan," Journal of Asian Economics, Elsevier, vol. 80(C).
    3. Deping Ye & Shangsong Zhen & Wei Wang & Yunqiang Liu, 2023. "Spatial double dividend from China’s main grain-producing areas policy: total factor productivity and the net carbon effect," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-22, December.
    4. Bai, Hanyu & Irfan, Muhammad & Hao, Yu, 2022. "How does industrial transfer affect environmental quality? Evidence from China," Journal of Asian Economics, Elsevier, vol. 82(C).
    5. Na Xu & Liqin Zhang & Xiyuan Leng, 2022. "Sustainable Food Production from a Labor Supply Perspective: Policies and Implications," Sustainability, MDPI, vol. 14(23), pages 1-19, November.
    6. Zhou, Yanju & Che, Yuan, 2021. "Research on Government Logistics Subsidies for Poverty Alleviation with Non-uniform Distribution of Consumers," Omega, Elsevier, vol. 104(C).
    7. Liu, Xinyue & Wang, Xiaobing & Xu, Zhigang, 2023. "The polarization and constraints of scale farming in China under the impact of rising wages," Journal of Asian Economics, Elsevier, vol. 86(C).
    8. Jianxu Liu & Xiaoqing Li & Shutong Liu & Sanzidur Rahman & Songsak Sriboonchitta, 2022. "Addressing Rural–Urban Income Gap in China through Farmers’ Education and Agricultural Productivity Growth via Mediation and Interaction Effects," Agriculture, MDPI, vol. 12(11), pages 1-23, November.

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    More about this item

    Keywords

    Factor reallocation; Structural transformation; Rural-urban income disparity; Grain subsidy policy; Computable general equilibrium model;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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