Farmers, Rural Areas, and Agricultural Development - Institutional Analysis and Empirical Examination

Author: Wu Shanshan
Publisher:
Publish Date: 2006-04-01
Features: This book is divided into 8 chapters, with Chapters 1-3 forming one part, discussing theoretical issues related to the institutional change in China's rural economy; Chapter 4 forms another part, elaborating on the development trajectory and experience of China's agriculture (e.g., grain production); Chapters 5-8 form a third part, discussing income determination and labor mobility of farmers, rural areas, and China's agricultural development within a basic framework. The book is comprehensive, well-structured, and rigorously argued, making it worth reading. It covers eight related topics. For any of these topics, I intentionally present them in the form of formal papers (which somewhat makes the book resemble a collection of essays). The purpose of doing so is to allow for more focused elaboration when discussing each topic, thereby increasing the information density of the text. However, these eight topics can also be divided into three parts. Chapters 1-3 form one part, discussing theoretical issues related to the institutional change in China's rural economy; Chapter 4 forms another part, elaborating on the development trajectory and experience of China's agriculture (e.g., grain production); Chapters 5-8 form a third part, discussing income determination and labor mobility of farmers, rural areas, and China's agricultural development within a basic framework. The themes and connections of each chapter in the respective parts are as follows:
Chapter 1 provides a feasible theoretical perspective for evaluating the efficiency of institutional change in the rural economy. The basic belief I aim to establish is that, both theoretically and empirically, the efficiency of institutional change depends on the degree of "consensus" between the government and a group of individuals regarding the institutional change. The rich experience and lessons of institutional change in China's rural economy provide ample material for testing the proposed theory.
Chapter 2 builds on the ideas of Chapter 1, aiming to conduct a historical comparative analysis of institutional change in China's rural economy and household agricultural production behavior based on theories from new institutional economics. The key features of this chapter are that it considers both the requirements of agricultural production characteristics for institutional arrangements of agricultural production organizations and the institutional arrangements of agricultural production organizations that have been or are currently in practice in China's socioeconomic context; it combines the behavioral responses of households under the existing institutional system and the resulting production efficiency, placing the historical comparative analysis within the context of convergence or divergence between government preferences and farmer preferences. Notably, in this chapter, household operations coexisting with production teams and collective economies during the production team period are incorporated into a unified and simple analytical framework, and the evolution of the household responsibility system is examined accordingly. This line of reasoning is further developed in Chapter 3. This chapter attempts to explore several possible pathways for the transformation of agricultural organizational forms from the production team model to the household operation model through a simple household behavior choice model. Moreover, it analyzes the characteristics of institutional change in agricultural production organization, combining agricultural production features, changes in government preferences, and natural geographical conditions.
Based on common economic knowledge, market-oriented reforms will have a profound impact on all aspects of socioeconomic life. From the perspective of domestic comparative advantages, differences in agricultural resource endowments between regions will be reflected in the characteristics of regional changes in grain production. Under the circumstances where farmers' use of production factors has become diversified, the development of non-agricultural industries will also have a significant impact on the development of agriculture and thus grain production. Given this consideration, Chapter 4 discusses the main economic reasons behind the characteristics of regional changes in grain production since the market-oriented reforms, based on a detailed description of these characteristics. This chapter first calculates and statistically analyzes the proportion of grain output in each province and region to the total grain output of China (1982-1998), describing the characteristics of regional changes in grain production from multiple dimensions and compiling a comprehensive index of regional characteristics of grain production in China. Taking this as the dependent variable, the empirical tests in this chapter show that rural per capita cultivated land resources and the pull of non-agricultural industry employment are important influencing factors for the regional characteristics of grain production in China.
Chapter 5 provides a brief discussion on the preconditions required for the healthy development of farmers, rural areas, and agriculture in an open economy. The idea of this chapter is that the development model of farmers, rural areas, and agriculture must form and optimize itself on the track of continuous expansion and deepening of the market; reforming the existing household registration system, restoring true choice rights to rural residents, accelerating the development of rural basic education, coordinating urban-rural population development, and adjusting the layout of the national economic center are key to achieving these preconditions.
Chapter 6 raises the question of the nature of income farmers derive from agricultural production. This chapter focuses on the proportion of income derived from agricultural production when it is divided into wage income and business income. The significance of this division is obvious, as solving this question will make the direction of rural tax reforms clearer. The calculations in this chapter show that, under China's current institutional system and cultivated land resource conditions, a significant portion of agricultural income belongs to wage income, while business income accounts for only a small proportion. Moreover, since the reform and opening-up, the growth rate of agricultural income in China has been slow, and the proportion of agricultural income in the total net income of rural residents has experienced a cyclical change, playing no significant role in the regional disparities of per capita total net income among rural residents. The parallel implementation of the abolished agricultural tax system and the personal income tax system in China has led to unequal tax burdens between urban and rural residents, while the "fee-to-tax" approach to standardizing farmers' extratax burdens has had limited effectiveness in reducing farmers' burdens. The calculation results in this chapter suggest that agricultural tax system reforms should take the personal income tax levied on urban residents' wage income as a reference.
Chapter 7 addresses the flaws in existing literature estimating the returns to education for Chinese farmers, estimating the total income effects of farmer education from both temporal and regional dimensions. The main conclusion of this chapter is that the return to education for Chinese farmers is not only much higher than existing estimates but also shows an upward trend; the total return to education for farmers in central and western regions is also significantly higher than that in eastern regions. Such estimation results reflect both the objective institutional foundation and the subjective rationality of farmers, carrying strong policy implications.
Chapter 8 proposes a new concept and estimation method for agricultural surplus labor. The two existing concepts of agricultural surplus labor either start from the perspective of constant agricultural output or constant agricultural labor input, while the definition in this chapter is based on constant agricultural income. However, this chapter proves that under a specific scenario close to reality, these three concepts are equivalent. The concept proposed in this chapter has a significant advantage: there exists a simple estimation method. The estimation method proposed in this chapter has general significance, with existing neoclassical estimation methods being just a special case of it. The specific estimation of agricultural surplus labor in China from 1985 to 2003 shows that the estimation method in this chapter is superior to empirical algorithms; economic growth has a lagging and inverse effect on the proportion and scale of agricultural surplus labor.
The book covers eight related topics. For any of these topics, I intentionally present them in the form of formal papers (which somewhat makes the book resemble a collection of essays). The purpose of doing so is to allow for more focused elaboration when discussing each topic, thereby increasing the information density of the text. However, these eight topics can also be divided into three parts. Chapters 1-3 form one part, discussing theoretical issues related to the institutional change in China's rural economy; Chapter 4 forms another part, elaborating on the development trajectory and experience of China's agriculture (e.g., grain production); Chapters 5-8 form a third part, discussing income determination and labor mobility of farmers, rural areas, and China's agricultural development within a basic framework. The themes and connections of each chapter in the respective parts are as follows:
Chapter 1 provides a feasible theoretical perspective for evaluating the efficiency of institutional change in the rural economy. The basic belief I aim to establish is that, both theoretically and empirically, the efficiency of institutional change depends on the degree of "consensus" between the government and a group of individuals regarding the institutional change. The rich experience and lessons of institutional change in China's rural economy provide ample material for testing the proposed theory.
Chapter 2 builds on the ideas of Chapter 1, aiming to conduct a historical comparative analysis of institutional change in China's rural economy and household agricultural production behavior based on theories from new institutional economics. The key features of this chapter are that it considers both the requirements of agricultural production characteristics for institutional arrangements of agricultural production organizations and the institutional arrangements of agricultural production organizations that have been or are currently in practice in China's socioeconomic context; it combines the behavioral responses of households under the existing institutional system and the resulting production efficiency, placing the historical comparative analysis within the context of convergence or divergence between government preferences and farmer preferences. Notably, in this chapter, household operations coexisting with production teams and collective economies during the production team period are incorporated into a unified and simple analytical framework, and the evolution of the household responsibility system is examined accordingly. This line of reasoning is further developed in Chapter 3. This chapter attempts to explore several possible pathways for the transformation of agricultural organizational forms from the production team model to the household operation model through a simple household behavior choice model. Moreover, it analyzes the characteristics of institutional change in agricultural production organization, combining agricultural production features, changes in government preferences, and natural geographical conditions.
Based on common economic knowledge, market-oriented reforms will have a profound impact on all aspects of socioeconomic life. From the perspective of domestic comparative advantages, differences in agricultural resource endowments between regions will be reflected in the characteristics of regional changes in grain production. Under the circumstances where farmers' use of production factors has become diversified, the development of non-agricultural industries will also have a significant impact on the development of agriculture and thus grain production. Given this consideration, Chapter 4 discusses the main economic reasons behind the characteristics of regional changes in grain production since the market-oriented reforms, based on a detailed description of these characteristics. This chapter first calculates and statistically analyzes the proportion of grain output in each province and region to the total grain output of China (1982-1998), describing the characteristics of regional changes in grain production from multiple dimensions and compiling a comprehensive index of regional characteristics of grain production in China. Taking this as the dependent variable, the empirical tests in this chapter show that rural per capita cultivated land resources and the pull of non-agricultural industry employment are important influencing factors for the regional characteristics of grain production in China.
Chapter 5 provides a brief discussion on the preconditions required for the healthy development of farmers, rural areas, and agriculture in an open economy. The idea of this chapter is that the development model of farmers, rural areas, and agriculture must form and optimize itself on the track of continuous expansion and deepening of the market; reforming the existing household registration system, restoring true choice rights to rural residents, accelerating the development of rural basic education, coordinating urban-rural population development, and adjusting the layout of the national economic center are key to achieving these preconditions.
Chapter 6 raises the question of the nature of income farmers derive from agricultural production. This chapter focuses on the proportion of income derived from agricultural production when it is divided into wage income and business income. The significance of this division is obvious, as solving this question will make the direction of rural tax reforms clearer. The calculations in this chapter show that, under China's current institutional system and cultivated land resource conditions, a significant portion of agricultural income belongs to wage income, while business income accounts for only a small proportion. Moreover, since the reform and opening-up, the growth rate of agricultural income in China has been slow, and the proportion of agricultural income in the total net income of rural residents has experienced a cyclical change, playing no significant role in the regional disparities of per capita total net income among rural residents. The parallel implementation of the abolished agricultural tax system and the personal income tax system in China has led to unequal tax burdens between urban and rural residents, while the "fee-to-tax" approach to standardizing farmers' extratax burdens has had limited effectiveness in reducing farmers' burdens. The calculation results in this chapter suggest that agricultural tax system reforms should take the personal income tax levied on urban residents' wage income as a reference.
Chapter 7 addresses the flaws in existing literature estimating the returns to education for Chinese farmers, estimating the total income effects of farmer education from both temporal and regional dimensions. The main conclusion of this chapter is that the return to education for Chinese farmers is not only much higher than existing estimates but also shows an upward trend; the total return to education for farmers in central and western regions is also significantly higher than that in eastern regions. Such estimation results reflect both the objective institutional foundation and the subjective rationality of farmers, carrying strong policy implications.
Chapter 8 proposes a new concept and estimation method for agricultural surplus labor. The two existing concepts of agricultural surplus labor either start from the perspective of constant agricultural output or constant agricultural labor input, while the definition in this chapter is based on constant agricultural income. However, this chapter proves that under a specific scenario close to reality, these three concepts are equivalent. The concept proposed in this chapter has a significant advantage: there exists a simple estimation method. The estimation method proposed in this chapter has general significance, with existing neoclassical estimation methods being just a special case of it. The specific estimation of agricultural surplus labor in China from 1985 to 2003 shows that the estimation method in this chapter is superior to empirical algorithms; economic growth has a lagging and inverse effect on the proportion and scale of agricultural surplus labor.