Production efficiency of Chinese agriculture: evidence from rural household survey data

Abstract

A shadow‐price profit frontier model is developed to examine production efficiency of Chinese rural households in farming operations. The model incorporates price distortions resulting from imperfect market conditions and socioeconomic and institutional constraints, but retains the advantages of stochastic frontier properties. The shadow prices are derived through a generalized profit function estimation. The shadow‐price profit frontier is then estimated and an efficiency index based on the estimated profit frontier is computed and decomposed to household characteristics. Empirical results using data from China's Rural Household Survey for 1991 reject the neoclassical profit maximization hypothesis based on market prices in favor of the general model with price distortions. Farmers' resource endowment and education influence their response to the market restrictions, thus alter their performance in terms of efficiency. The estimated efficiency index ranges from 6% to 93% with a sample average of 62%. Households' educational level, family size and per capita net income are positively related to production efficiency. Households living in mountain areas or with family members employed by the government or state industries are relatively inefficient. Reducing market intervention, allowing right of use of farm land to be transferred among households, encouraging migration of excess farm labor, and promoting farmers' education will improve rural households' efficiency in agricultural production.

Resource use efficiency under self‐selectivity: the case of Bangladeshi rice producers

“…Farmers exhibit a wide range of production inefficiency ranging from 48 per cent to 95 per cent in modern rice farming. Observation of wide variation in production efficiency is not surprising and is similar to the results of Ali and Flinn (1989), Wang et al. (1996) and Bravo‐Ureta et al.…”

“…With the development of stochastic frontier analysis by Aigner et al. (1977), a large number of studies followed which typically place the farming efficiency of developing country farmers in a range of 60 per cent to 82 per cent (e.g., Ali and Flinn 1989; Wang et al. 1996; Coelli et al.…”

Joint determination of the choice of growing season and economic efficiency of maize in Bangladesh

“…Farmers exhibit a wide range of economic inefficiency, ranging from 1% to 26% in winter maize farming. Observation of a wide variation in production efficiency is not surprising and is similar to the results of Ali and Flinn (1989), Wang et al (1996), Rahman (2003) and Bravo et al (2007) for Bangladesh, Pakistan Punjab, China, and a total of 167 case studies from developing countries, respectively.…”

Whether crop diversification is a desired strategy for agricultural growth in Bangladesh?

“…Use of the education level of farmer as a technical efficiency shifter is fairly common (e.g., Asadullah and Rahman, 2008;Wang et al, 1996;Wadud and White, 2000). The education variable is also used as a surrogate for a number of factors.…”