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The Impact of Financial Market Development on Agricultural Factor Misallocation: Household-Level Evidence from China

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  • Song Liu
  • Xiongzhi Wang
  • Mengyuan Yang
  • Ziling Wang

Abstract

We study the impact of financial market development on the allocation of agricultural factors in China, using national household-level survey data from 2010 to 2014. Our empirical results show the following: (1) the prices of capital and labor are negatively distorted, whereas the price of land is positively distorted; (2) the east region of China has the lowest efficiency of agricultural factor allocation; (3) the breadth of financial market development improves the agricultural factor allocation in all three regions in China, whereas the depth of financial market development only enhances the agricultural factor allocation in the west region of China. Our study presents the very first microlevel evidence on the extent of agricultural factor misallocation in China. Moreover, our results inform policymakers’ choice of prioritizing whether the breadth or the depth of the financial market alleviates agricultural factor misallocation.

Suggested Citation

  • Song Liu & Xiongzhi Wang & Mengyuan Yang & Ziling Wang, 2021. "The Impact of Financial Market Development on Agricultural Factor Misallocation: Household-Level Evidence from China," Mathematical Problems in Engineering, Hindawi, vol. 2021, pages 1-9, April.
    • Handle: RePEc:hin:jnlmpe:9997438
    DOI: 10.1155/2021/9997438
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    Cited by:

    1. Shuai Qin & Hong Chen & Tuyen Thi Tran & Haokun Wang, 2022. "Analysis of the Spatial Effect of Capital Misallocation on Agricultural Output—Taking the Main Grain Producing Areas in Northeast China as an Example," Sustainability, MDPI, vol. 14(10), pages 1-17, May.

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