A study on total factor productivity of agricultural production of rural households in China

【Author】

WANG Lu;YANG Rudai;WU Bi

【Institution】

School of Economics, Peking University;School of Economics, Peking University;Research Center for Rural Economy, Ministry of Agriculture and Rural Affairs

【Abstract】

Agriculture is the most fundamental economic sector in the national economy, and agricultural production efficiency has important influences on both structural transformation and economic development. The increase in agricultural productivity can increase the output of agricultural sector and accelerate its development. It can also release a large amount of rural surplus labor, promotes the development of industry and service sector and accelerates the transformation of economic structure. Moreover, the increase in agricultural productivity can promote farmers’ production efficiency and income, effectively guarantee China’s food security, and narrow the rural-urban income gap. Based on the dataset of more than 20,000 households in fixed survey area in China from 1995 to 2017, this paper collected various crops inputs, outputs and prices, calculated the household total factor productivity (TFP) in a standardized way, and also studied the structural transformation and dynamic efficiency change in Chinese agricultural production. This paper mainly focused on household farming TFP. Firstly, following the exiting literature, we set the classic Cobb Douglas function as the household agricultural production function. Secondly, we calculated crop prices based on sample information and constructed the total agricultural output value of households, and then used the agricultural working days, the area of cultivated land operated, the amount of intermediated inputs purchased by households, and the original value of fixed assets after the perpetual inventory method as labor, land, intermediate inputs and capital input. Thirdly, we used the fixed effects model to estimate the elasticities of factor and then calculated household TFP. Last but not least, based on the estimated household TFP and factor elasticities, we constructed national TFP and studied the dynamics of agricultural production. We also used the OP decomposition and regression methods to study resource allocation efficiency. The study has the following findings. (1) During the sample period, the overall agricultural TFP of the country showed an upward trend, with an average annual growth rate of 1.87% to 2.68%. (2) The changes in the agricultural production structure are obvious, the degree of division of labor rises, and the impact of intermediate products is becoming increasingly important in agricultural production. The agricultural value-added rate has dropped from 78% to 52%. In terms of coefficients of factor elasticities, the coefficient of intermediate products rose from 0.24 to 0.40, the land input coefficient decreased from 0.38 to 0.22, the labor input coefficient decreased from 0.28 to 0.24, and the capital input coefficient remained at a low level of around 0.02. (3) The efficiency of agricultural resource allocation has improved year by year, but the mode was with huge differences compared with the manufacturing sector. In the annual decomposition of TFP growth, the contribution of resource allocation efficiency improvement increased from 19% to 31%, of which the impact of entry and exit was 4%, which was significantly lower than that of the manufacturing sector. This paper has vital significance for deeply understanding China’s agricultural production and structural transformation in the rapid process of industrialization and urbanization. This paper also provides a solid foundation for the future research on agricultural efficiency improvement and rural development. The estimation of farmers’ agricultural production efficiency is helpful for studying farmers’ production behavior and labor allocation during the transition period. Compared with exiting research, this paper uses the detailed long panel dataset and systematic approach to estimate and evaluate household level TFP, which can more comprehensively reflect the dynamics of household agricultural production.

【Keywords】

agricultural production;TFP;structural transformation;resource allocation

References

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Total: 13 articles

  • [1] GUCHENG LI ZHONGCHAO FENG(Huazhong Agricultural University)LIXIA FAN(Wuhan Polytechnic University), Is the Small-sized Rural Household More Efficient? The Empirical Evidence from Hubei Province, China Economic Quarterly,
  • [2] Zhu Xi,Shi Qinghua and Ge Qingen (Antai College of Economics and Management,Shanghai Jiao Tong University), Misallocation and TFP in Rural China, Economic Research Journal,
  • [3] LI Zhou;ZHANG Hai-peng;Rural Development Institute,Chinese Academy of Social Sciences;Collaborative Innovation Center for Rural Reform and Development;, Productivity Growth in China's Agriculture During 1985-2010, Journal of Integrative Agriculture,
  • [4] Yang Rudai;School of Economics,Peking University;, Study on the Total Factor Productivity of Chinese Manufacturing Enterprises, Economic Research Journal,

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