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Productivity, efficiency and structural problems in Chinese dairy farms

Listed author(s):
  • Xiaohua Yu

Purpose - The purpose of this paper is to identify the structural problem in the Chinese dairy sector. There exists a large number of low-efficiency, small-scale farms, and productivity inequality between small and large farms keeps increasing, which is a possible driving force behind the Melamine scandal in 2008. Design/methodology/approach - Using the stochastic frontier production function, this paper estimates and compares the changes in technology and technical efficiency between backyard, small-scale, medium-scale and large-scale dairy farms in China over the period between 2004 and 2008. Findings - There are compensating effects between technology and technical efficiency. However, low yield for backyard farms is mainly caused by traditional low-yield varieties, even though the technical efficiency is very high, which cannot compensate for the low technology. Research limitations/implications - The author put the assumption of constant return to scale mainly due to the data availability. Such an assumption implies that there are no scale-effects between the different scales in productivity, and the productivity difference is explained by technology and technical efficiency. Practical implications - In order to solve the structural problems, Chinese governments should help small-scale farmers to adopt new high-yield varieties, to subsidize small-scale farmers, and to train farmers to master the complicated skills for raising high-yield varieties. Originality/value - The paper gives another possible explanation for the Melamine scandal of milk powder in 2008. If the structural problem cannot be solved, similar food safety scandals could happen once again.

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Article provided by Emerald Group Publishing in its journal China Agricultural Economic Review.

Volume (Year): 4 (2012)
Issue (Month): 2 (May)
Pages: 168-175

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Handle: RePEc:eme:caerpp:v:4:y:2012:i:2:p:168-175
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  1. Kumbhakar,Subal C. & Lovell,C. A. Knox, 2003. "Stochastic Frontier Analysis," Cambridge Books, Cambridge University Press, number 9780521666633, November.
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