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Reforms, Incentives, Welfare and Productivity Growth in Chinese Wheat Production

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Abstract

Following the rural reform in 1978 a series of agricultural reforms were introduced in China with an aim to create incentives for the farmers to produce more. The nineties. price reform that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production,this apparently motivated the government to take over the control of agricultural prices in 1998. For a dataset that covers all the major rural reforms undertaken in China, we examine how and to what extent these reforms affected the productivity and welfare of wheat farmers in China. We find that the nineties. price reforms resulted in a high magnitude of effort-response from wheat farmers which led to a faster growth of the incentive component of productivity. Due to random weather shocks this response did not result in the expected level of profit and as a result the farmers suffered a decline in welfare. The regulations introduced in 1998 destroyed the incentive-induced growth in TFP. In general wheat farmers in China responded highly when markets were made more competitive, and their effort-response for flat subsidies (e.g. the ones introduced in the eighties) was very marginal.

Suggested Citation

  • Patel, Vasita & Selim, Sheikh, 2010. "Reforms, Incentives, Welfare and Productivity Growth in Chinese Wheat Production," Cardiff Economics Working Papers E2010/16, Cardiff University, Cardiff Business School, Economics Section, revised Jan 2011.
  • Handle: RePEc:cdf:wpaper:2010/16
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    1. Alston, Julian M. & Pardey, Philip G. & Taylor, Michael J., 2001. "Agricultural science policy," Food policy statements 32, International Food Policy Research Institute (IFPRI).
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    Keywords

    China; Incentives; TFP; Agriculture; Wheat Production;

    JEL classification:

    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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