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The Impact of Price Regulations on Regional Welfare and Agricultural Productivity in China

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Abstract

The nineties' agricultural reform in China that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural prices,this apparently motivated the government to take over the control of agricultural prices in 1998. We examine how and to what extent this reform affected the productivity and welfare of grain farmers in China at the regional level. We find that the price regulation that destroyed the incentive to exert more effort adversely affected the growth in agricultural productivity but contributed to the growth in farmers. welfare. Although the price regulations resulted in short term improvement in welfare across all the regions, for the long run such regulations can result in larger drop in agricultural production because of its negative impact on incentives to produce more.

Suggested Citation

  • Selim, Sheikh, 2011. "The Impact of Price Regulations on Regional Welfare and Agricultural Productivity in China," Cardiff Economics Working Papers E2011/2, Cardiff University, Cardiff Business School, Economics Section.
  • Handle: RePEc:cdf:wpaper:2011/2
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    Keywords

    China; Welfare; TFP; Agriculture; Grain 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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