Total Factor Productivity Change in China's Farming Sector: 1952-1989

Abstract

A crucial problem in economic development is choosing institutions that are relatively efficient in resource allocation and conducive to growth. However, institutional innovations usually take time, and it is often difficult to isolate these effects from the effects of noninstitutional factors. Modern China is one of the few exceptions. It offers a rich experience in dramatic institutional changes. After 1949 a smallholder system was experimented with immediately after the land reform. This was quickly followed by various forms of collectivization. Since 1979 the Household Responsibility System (HRS) has gradually replaced the commune system. Thus, China provides a unique opportunity for a comparative study of these different rural institutions in terms of the total factor productivity index (TFPI). This index measures the change in output relative to the change in inputs. The examination of the TFPI also has policy implications. The apparent plateau in grain production and the slow growth in other crop production from 1985 to 1989 constitute a sharp contrast to the period 1979-84, which witnessed rapid growth in both grain and economic crop production.' In China, public ownership is favored by orthodox ideology, and noneconomic factors often play an important role in economic life.2 In facing slower growth in crop production, whether the HRS should or should not be the long-term rural institution has become a sensitive question again and has kindled a heated debate within China. In this study, I will examine the performance of the successive rural institutions in China in terms of changes in the TFPI over the period 1952-89, using 1989 as the final year of my study. The most important finding of this study is that the HRS showed a clear advan-