Climate Change, Risk and Productivity: Analyses of Chinese Agriculture

Abstract

This thesis analyzes challenges to agricultural production in China, which could impair the country’s ability to maintain or to increase its output of important food commodities. By means of three empirical studies, issues regarding the effects of climate change and the development of total factor productivity are studied, which have so far received insufficient attention. In the first study, the effects of climate change on Chinese inland aquaculture production are analyzed. For this purpose, the method proposed by Just and Pope (1978, 1979) is adapted and applied to determine the marginal effects of changing temperatures and precipitation levels on both the expected yield (i.e. mean yield) and the yield risk (i.e. yield variance) in the inland aquaculture sector. In the second study, this method is applied to analyze the marginal effects of changing temperatures and precipitation levels as well as of changes in climatic variability on the expected yield and the level of yield risk in Chinese grain farming. An important additional feature of the flexible non-linear production models, which are employed for these two studies, is that they also control for the influences of the regular input factors of production. In the third study, total factor productivity change and its determinants (i.e. technical change, technical efficiency change and scale change) in the Chinese inland aquaculture sector are analyzed based on a parametric stochastic frontier model assuming time-varying technical inefficiency. Special emphasis is placed on studying the development, geographical distribution and determinants of provincial technical efficiency scores. The results of the first climate change impact study indicate that China’s inland aquaculture sector can be expected to become a beneficiary of the projected increases in both the country’s annual average temperature and its total annual precipitation. This stems from the positive marginal effects of both climate factors on the sector’s mean yield, even though the marginal effect of temperature increases turns out to be diminishing over time. Moreover, rising annual average temperatures are found to reduce yield risk at the margin. Based on the second climate change impact study, it can be concluded that the Chinese grain sector as whole could suffer net losses as a result of the projected changes in Chinese climate. In particular, both North and South China would suffer from reductions in mean grain yields following marginal increases in annual average temperatures. The effect would, however, be stronger in the water-scarce northern provinces, which would benefit substantially from increasing levels of total annual precipitation and would suffer from an increasing variability in precipitation. South China, however, would experience additional reductions in its mean yield as a result of increasing precipitation levels. With respect to yield risks, the results indicate that increasing temperatures and precipitation levels would reduce the yield variance in South China. The analysis of total factor productivity and its determinants in Chinese inland aquaculture production indicates that the sector has benefited particularly from improvements in technology, while technical efficiency has followed a negative trend. The decreasing capacity of the agricultural extension system to offer services to aquaculture producers is identified as an important determinant of the latter development. Nevertheless, total factor productivity has nearly doubled between 1993 and 2009. Moreover, technical efficiency in inland aquaculture production turns out to be quite heterogeneous across the Chinese provinces and to be highest in the southeast and east of China.