Interstate competition in agriculture: Cheer or fear? Evidence from the United States and China

Abstract

Understanding how interstate competition affects agricultural production in the United States and China is important, as the international food market depends heavily on these two giants. This article aims to evaluate the overall effects of multi-dimensional interstate competitions on agricultural production, which is achieved using spatial production functions and model averaging methods. Using panel data, this article finds that interstate agricultural competition ought to be encouraged in the United States due to their positive impacts on spillovers and productivity but should be discouraged in China as it leads to negative spillovers and a decrease in productivity. Additionally, intrastate competition increases productivity in the United States but conversely decreases productivity in China. Other major drivers of productivity growth in the two countries are also found to vary, which provides evidence of a centrally planned system in China compared with the market system in the United States. U.S. agriculture enjoys the benefits of competition thanks to agricultural industrialization and a competitive market, while the planned system with government interference found in China has benefits as well as detriments. Food policy implications are also discussed.