Jikun Huang

Technological change: rediscovering the engine of productivity growth in China's rural economy

The purpose of the paper is to explain the determinants of technological adoption and demonstrate the importance of technological change in rice yield growth during Chinas reform period. Using a unique data set on the nations rice economy, in the first part of a two stage econometric model, adoption of new technologies (hybrid rice and single/double cropped rice) is shown to be chosen on the basis of two basic factors: the availability of a new technologies and the willingness of producers to adopt them. Treating technology as an endogenous factor, a set of rice supply and derived demand equations is subsequently estimated, and the parameters are used in a decomposition analysis. While institutional and environmental factors are found to be significant detenninants of post-reform productivity increases, technological change has been shown to be the greatest across all periods, and can account for most of the growth in recent years.

Subsidies and distortions in China’s agriculture: evidence from producer-level datalSUPg†l/SUPg

Concerned about national grain self-sufficiency and rural household incomes, in 2004 China announced that it was planning to reverse its longstanding policy of taxing farm households and instead began to provide them with subsidies. Over the past five years, annual announcements have trumpeted rises in subsidies. Surprisingly, despite the historic turnaround of policy and the likely implication of this subsidy policy to China’s grain economy, there has been no household-level survey-based research that has sought to understand the effect of China’s subsidy programme on household behaviour. Using data from a national survey of more than 1000 households, we examine in detail a number of different dimensions of the subsidy programme. According to the survey-based findings, we have shown that although agricultural subsidies per farm are low, on per unit of cultivated area basis or total amount of budget, the subsidies are high. Almost all producers are receiving them. Subsidies are mostly being given to the land contractor, not the tiller. Most importantly, the subsidies appear to be nondistorting. No matter if we look at descriptive statistics in tables, scatter plots or regression analyses, there is no evidence that grain subsidies are distorting producer decisions in terms of grain area or input use decisions.

The Impact of Bt Cotton and the Potential Impact of Biotechnology on Other Crops in China and India

Since the 1980s agricultural biotech investments by the public sector have increased substantially in both China and India. In the last two decades there has also been a dramatic increase in private section investment in agricultural biotechnology particularly in India. The promise of major benefits of Bt cotton identified in early socioeconomic studies of Bt cotton has proven to be true. Bt cotton has spread to at least 66% and 85% of total cotton areas of China and India, respectively – wherever bollworm is a major problem. Bt cotton continues to control bollworm in both countries, and farmers continue as major beneficiaries rather than biotech or seed companies. The major impacts have been yield increases in India and reduced pesticides consumption in China. In China, evidence also suggests that Bt cotton has suppressed the bollworm population so that non-Bt cotton growers and producers of other crops that are susceptible to bollworm are also benefitting. The chapter also provides evidence that in the near future Bt rice and Bt eggplant could have major positive impacts by reducing pesticide use and farmers’ exposure to chemical pesticides and increasing yields. Both crops were approved for commercial production by government biosafety regulators, but are not yet available for commercial cultivation.

Chapter 14 – Adoption of Water-Saving Technology

The overall goal of this chapter is to examine the adoption status and determinants of water-saving technologies (WSTs) in agriculture. Results show that of the different types of WSTs, household-based technologies have grown most rapidly, and traditional technologies have the highest rates of adoption. The most successful technologies have been highly divisible and low-cost ones that can be implemented without collective action or large fixed investments. Technologies that do not fit this description are adopted on a more limited scale, at least in part due to the failure of policy makers to overcome the constraints to adoption. Farmers in many parts of the region have not adopted even rudimentary WSTs. This suggests that the incentives are not in place to encourage efficient water use.

The Role of Agriculture in China’s Development: Performance, Determinants of Successes and Future Challenges

The goal of this chapter is to document the performance of China’s agriculture sector during the People’s Republic era, against the Johnston and Mellor criteria to assess how well the agricultural sector has done. After establishing the background on China’s agricultural past, Sect. 3.2 of the chapter examines the performance of China’s rural economy during the reform era. Section 3.3 presents an analysis of the shifts in the institutional base and policy strategy of reform that have facilitated the performance of the agricultural sector and those that have constrained it since the 1980s, including decollectivisation followed by market liberalization at a later stage, underscoring the sequencing and gradual pacing of reforms unlike the approach adopted by the transition economies in Europe. The chapter concludes with Sect. 3.4, discussing some of the future policy challenges along with the issue of China’s farm size; groundwater management; the subsidy program; the issues of conventional and plant biotechnology research; and biofuels.

Chapter 12 – Irrigation Water-Pricing Policy

This chapter analyzes the potential of reforming groundwater pricing as a way to encourage water conservation and to assess its impacts on crop production and producer welfare in rural China. The chapter develops an approach that can inform policy makers about the effectiveness of water-pricing policy as well as how water-pricing policy should be implemented. The first step in the approach involves estimating a set of crop-specific production frontiers as well as household-level technical inefficiency parameters. The estimation results aid us in measuring the relationship between water and crop output as well as the value of water to households. Empirical results show that in general, there is a large gap between the cost of water and the value of water to producers. Simulation analyses are used to examine the impact of two different water-pricing policies on water savings, one that takes into account the gap between the cost of water and water value (henceforth, the informed policy ); the other ignores this gap (henceforth, the uninformed policy).

Chapter 9 – Determinants of Contractual Form

This chapter explains the puzzling fact that in organizing the management of surface water, village leaders have provided incentives to canal managers in some areas, but not in all. The model of contractual choices employed predicts that the optimal contractual choice depends on the relative abilities of the leader and the manager, the design of the cultivated land, the characteristics of the canal system, and the opportunity costs of the leader and the pool of managerial candidates. The unifying mechanism is the relative change in the ability of the leader and manager to perform the unmarketable activities that are needed to provide irrigation services. Empirical analysis supports predictions made from the model and identifies a set of factors influencing contractual choice including the nature of its cultivated land, the design of its canal system, and the characteristics of the leader and the pool of managerial candidates.

Chapter 2 – Irrigation, Agricultural Production, and Rural Income

This chapter examines the impact irrigation has had on agricultural production and income in rural China. Both descriptive statistics and multivariate analysis show that irrigation raises crop revenue as well as household income. Although the marginal impact of irrigation on crop revenue appears to be higher in richer areas, since poorer households rely more on crop income, farmers in poor areas increase their incomes relatively more than those in richer areas. Income inequality is decomposed in three different ways: by sources of income, by groups according to access to irrigation, and by regression-estimated income flows due to specific household characteristics. All three approaches reveal the propensity of irrigation to equalize income. In addition, even after accounting for the increased capital costs and production costs associated with irrigation, returns from investments in irrigation are positive in the majority of villages that have invested in new irrigation systems.

Chapter 8 – Water User Associations and Contracts: Evolution and Determinants

This chapter documents the evolution of existing and new water management institutional forms over time and across provinces throughout northern China. The reform-oriented institutions have some features that have improved water management. One such feature is the economic incentives that link the earnings of managers with the quality of irrigation services provided. Another is transparency of management. However, even among reform-oriented institutions, there is little participation by farmers in any of the management activities. Among the factors that explain why some villages have chosen to retain collective management, while others have decided to form Water User Associations (WUAs) or engage in contracting, two stand out: water resource availability and government policy. Villages are more likely to reform when water is relatively abundant and when the village canal network is relatively large. When the county level or the township level governments promoted either WUA or contracting, most villages reformed.

Chapter 4 – Water Survey Data

This chapter describes the data sources of empirical analysis in this book. Over the years, the authors have conducted a series of household surveys to study Chinas water economy, in general, and address questions about the effectiveness of irrigation practices and agricultural water management, in particular. These surveys cover large geographical areas and have collected detailed information on agricultural production activities and water use. The chapter provides details on the sample sites and the sampling strategies of the surveys.