The impact of China’s new agricultural subsidy policy on grain crop acreage

Abstract

As China is the world’s largest producer, importer, and consumer of agricultural products, the new agricultural subsidy policy has significant implications for the global agricultural market. We assess the impact of the new agricultural subsidy on the grain crops acreage by applying difference-in-difference estimation to the China Rural Household Panel Survey (CRHPS) data. Results indicate that the new agricultural subsidy increases grain crop acreage. The results remain robust even after controlling for the effects from other policy measures. The study also identified the mechanism behind the subsidy’s effect. Namely, the new program encourages operators to increase their grain crop acreage by renting more land and increasing the share of grain crops grown. Regarding heterogeneity of the results, the subsidy policy has a more positive impact on grain crop growers than on mixed crop growers, it does not affect large farms (>100 Mu) and its influence is greater among operators in the Northern regions of China. Our findings are relevant for understanding the effect of China’s new agricultural subsidy policies and agrarian market reforms.