Abstract
The main objective of this paper is to model the production and supply response in Chinese agriculture, which includes not only the standard arguments like expected prices but also risk. We extend Lin's work [1991, 1992] by modelling supply response as a three-equation model. We fit our model to data for 28 Chinese provinces from 1970 to 1997 to determine whether national Chinese agricultural supply is price and price risk responsive. Further, we fit our model to data for North, Northeast, South and Southeast regions. Results from the three systems equations are compared to single equation estimations. At the national level, Chinese agriculture is found to be price and price risk responsive. The regional analyses suggest that significant regional differences exist. Unlike Lin, we do not find the household responsibility system (HRS) to be the dominant factor in increased yields in different regions of China.
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