Productivity change and the effects of policy reform in China's agriculture since 1979

Abstract

During China's rural reforms, policies were frequently adjusted. Most policies favoured the continuation and deepening of reform; but some were contradictory or even led to regression in the reform process. How have the rural reforms affected China's agricultural production over the past three decades; and what lessons can be learned to aid the future course of reform? To answer these questions, this study estimates productivity change in China's agriculture and evaluates the effects of policy on agricultural output during the reform period. Aggregated provincial-level data for the 1979–2008 period are used in a translog production frontier model to estimate indices of total factor productivity (TFP) change and its three components—technical change, technical efficiency change, and a scale effect—with a focus on explaining the variation in technical efficiency. The estimation results show that the impressive improvement of TFP change is dominated by the technical change component. However, technical efficiency change and scale effects have worked against the improvement in TFP change in most periods. To improve technical efficiency, social welfare policies designed to eliminate the rural–urban divide, and reform polices focusing on factor market reforms, such as reform of the household registration system (hukou) and reform of land rights, seem to hold some potential.