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The Investigation of the Income, Production Behavior and Technical Efficiency of Chinese Farm Households

Author: XuCuiPing
Tutor: ShiQingHua;Holly H.Wang
School: Shanghai Jiaotong University
Course: Agricultural economic rationale
Keywords: rural taxation reform farm household’s income productive input technical efficiency fixed effect model fixed observation point
CLC: F224
Type: PhD thesis
Year: 2010
Downloads: 229
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How to improve agricultural productive efficiency and promote the farm household’s income has always been a hot-spot topic for academy and regulation in China. The current Chinese government has set the agriculture as the highest priority, and aimed to solve the "three agricultural issues in China". The central government has also implemented some policies to drive the agricultural production, among which abolishing the rural taxation in 2006 has been one of the hottest topics for the academy community. The rural taxation reform (RTR) is one of the mostly impacted events in the progress of Chinese reform in the past 30 years, and is also another important rural reform after the Chinese land reform and farm household responsibility system. However, some questions are still needed to be answered, for example, Does the RTR works as expected? How does it affect the income increment and decision behavior of the farm households? Does it benefit to improve agricultural productive efficiency?In this study, we made use of modern economics research methodologies to develop a farm household income model to evaluate the performance of RTR, which has been used to analyze how the RTR has affected the farm household’s income and productive decision. Moreover, another model to measure the technical efficiency has been proposed to assess how the productive efficiency of farm household was affected by the RTR implementation. In this study, we developed several sections to answer the above questions, respectively.First of all, in chapter 3 we discussed some variables related to the taxation burdens of farm household, including sampling site, farmer’s family category, non-agricultural ratio, education level, and social status. Making use of the data collected from the fixed observation points developed by Chinese Agricultural Department, we have analyzed more than 10 thousands records from Shanxi, Zhejiang and Shandong provinces. It was found that the taxation burden has obvious regional characters, and the changing patterns in Shanxi, Zhejiang and Shandong associated with the rural taxation reform are much different. Also, we found that it is the farm household mainly got income from the agriculture that mostly benefit from the rural taxation reform.In the second section (i.e. chapter 4 and 5), we mainly focus on determining whether the rural taxation reform has promoted the income of the farm household. Firstly, we collected a panel dataset obtained from the fixed observation points in 28 villages from Shanxi, Zhejiang and Shandong collected from 1995 to 2005. We developed a fixed effect model to determine the effect of rural taxation reform on the income of farm households. We found that the rural taxation reform has significantly promoted the income of farm household after deducing the effect of farmer’s character, farmer family agricultural investment, and farmer social status and year dummy variables. Meanwhile, it is found that the average increment effects caused by the rural taxation reform for shanxi farmer is about 10.42%, 8.11% for Zhejiang and 5.65% for Shandong. Furthermore, we employed some field surveys to validate the results obtained from the empirical study. We have surveyed the farm households in Shanxi, Shandong, Hubei, Yunan and Henan. The results found that more than 50% of surveyed farmer selected the option that the rural taxation reform has made high impacts on their income, and more than 90% agree that the rural taxation reform has worked. Moreover, more than 70% surveyed farmers felt very happy when they knew the cancellation of rural taxation. The above results indicated that the farmers were rational, and their answers were consistent with their productive action.In the section 3 (i.e. chapter 6), we focused on how the rural taxation reform has affected the farm household’s productive input. Making use of the data collected from the fixed observation points in Shanxi, Zhejiang and Shandong, we developed the dual direction fixed effect model to study how the rural taxation reform affected the farm household’s productive decision. It was found that the rural taxation reform had promoted the farmer’s passion to invest more on the agricultural production, but the decisional patterns were significantly regional. After reforming, the farmers in Shanxi and Shandong have added the input of the productive capital but reduced the labor, while the farmers in Zhejiang have significantly added labor input, but not significantly increased productive capitals. Meanwhile, the capital productive elasticity of Shanxi farmers has significantly increased after reforming, while labor elasticity has decreased; the productive elasticity of land and labor of Shandong farmers has significantly increased, but that of capital was not significantly changed; the productive elasticity of capital and land was significantly increased, but that of labor has decreased.In section 4 (i.e. chapter 7), we investigated the change of farmer’s productive efficiency with the rurual taxation reform. We made use of the stochastic frontier function to calculate the technical efficiency of two agricultural provinces, Shanxi and Shandong. Here, Zhejiang was excluded due to the few qualified samples. We found that the average technical efficiency in Shandong farmers (i.e. 0.63) were much higher than those in Shanxi (i.e. 0.58), while the increasing rate of Shanxi were higher than that of Shandong. Then, we developed an efficiency determinant model by controlling some variables including farmer’s education, social status, non-agricultural ratio, family scale and year-dummy one. Our study showed that the rural taxation reform has positive effect on the technical efficiency, and it was significantly improved in Shanxi but not in Shandong. It suggests that the improvement might be related to the original technical level, and it affected more those with low efficiency than those with relatively high level.Some policies suggestions have been proposed: Firstly, our study indicated that the rural taxation reform has significantly promoted the farm household’s income, which is consistent with most of the main-stream opinions in the economic community that the protection degree of the agriculture is positive related to the economic growth. Therefore, we proposed that the subsidy to agriculture should be optimized and enlarged for Chinese farmers. Secondly, our research has shown that the rural taxation burden is regionally specific, so does the farmer’s response toward the rural taxation reform by inputting their productive resource. Based on these, we proposed that the supportive policies to farmers should be attention to the unbalance of the different regions and their development levels.The innovation in this paper was that we have developed the economics models coupled with a large amount of data collected from the fixed observation points and field survey to investigate how the rural taxation reform has affected the farm household’s income,productive decision and technical efficiency. Specifically, it could be manifested in the following points: (1) Using the farm household as the basic observation unit, we developed the fixed effect model based on the large scale of panel data to evaluate the rural taxation reform. We proposed a Chinese farmer’s income models by controlling farmer’s input, capital, social status, and year-dummy variables to investigate whether the rural taxation reform has promoted the farm household’s income, and the results has been validated by our field surveys. (2) We proposed a model based on the production function to investigate how the rural taxation reform has affected the farmer’s production, including capital and labor input. (3) We made use of the stochastic frontier function to estimate the farm household’s technical efficiency and investigate the relationship between the rural taxation reform and the technical efficiency of farm household.

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