The influence of expected profits and adjustment to agricultural policies on the supply of agricultural products in China
【Abstract】This paper constructed a dynamic supply response model for nine agricultural products by introducing variables such as expected profits and agricultural policy, studied the factors affecting the sown area and the yield per unit area of crops, and made a comparative analysis on the differences in agricultural product supply responses before and after the adjustment to agricultural policies in 2004. The results showed that the expected profits had a significantly positive impact on the sown area of crops. After the adjustment to agricultural policies in 2004, the impact of expected profits and natural risks on the supply of agricultural products generally weakened, indicating that China’s protection of farmers’ interests and increased investment in the agricultural infrastructure had enhanced the resilience of agricultural production. In addition, the sown area lagging one period and the yield per unit area lagging one period have great impacts on the supply of agricultural products, and the supply of agricultural products was rigid. The proportion of irrigated area and technological progress had significantly positive impacts on the yield per unit area of crops, and natural risks had a significantly negative impact on the yield per unit area. This paper believes that the relationship between expected profits and the agricultural product supply should be fully utilized, and the supply-side structural reform of agriculture should be promoted to change the structural shortage of agricultural products by changing comparative profits and farmers’ expectations. In addition, strengthening construction of the rural infrastructure, investment in agricultural science and technology innovation, and construction of disaster prevention and disaster prevention facilities can play a positive role in the supply of agricultural products.
【Keywords】 supply of agricultural products; expected profits; adjustment to agricultural policies; first order difference GMM estimation;
. ① Data source: Ministry of Agriculture of the People’s Republic of China (eds.) 新中国农业60年统计资料. Beijing: China Agricultural Press, (2009). [^Back]
. ② Data source: http://www.stats.gov.cn/tjsj/zxfb/201712/t20171208_1561546.html. [^Back]
. ① For example, areas in the south of the Great Wall mostly grow winter wheat, while the alternative crop is mainly rapeseed. [^Back]
. ① The data on Chongqing and Hainan were merged into those on Sichuan Province and Guangdong Province respectively. The Tibet Autonomous Region, China’s Hong Kong, China’s Macao and China’s Taiwan were not studied due to a lack of data. [^Back]
. ② National Bureau of Statistics of the People’s Republic of China (eds.) China Statistical Yearbook (2009–2016, over the years)（中国统计年鉴）. Beijing: China Statistics Press. [^Back]
. ③ Department of Rural Surveys, National Bureau of Statistics of China (eds.). China Rural Statistical Yearbook (2009–2016, over the years) (中国农村统计年鉴). Beijing: China Statistics Press. [^Back]
. ① Ministry of Agriculture of the People’s Republic of China (eds.) 新中国农业60年统计资料. Beijing: China Agricultural Press, (2009). [^Back]
. ② In this paper, the profit is deducted from the total income of each crop minus the total cost. And the household labor expense is deducted from the total cost. In the survey, it is found that farmers rarely consider household wages when calculating profits. Therefore, it is more reasonable to remove household labor costs from costs. [^Back]
. ③ The Department of Price of National Development and Reform Commission of the People’s Republic of China (eds.). National Agricultural Cost-benefit Data Assembly (1980–2016, over the years)（全国农产品成本收益资料汇编). Beijing: China Statistics Press. [^Back]
. ④ National Meteorological Information Center (http://data.cma.cn). [^Back]
. ① Since the total yield is the product of the sown area and the yield per unit area, that is, yit = AitYit, after calculating the logarithm, we get lnyit = lnAit+ lnYit. The expected profits as are taken as an example to calculate the long-term elasticity to the total yield. We calculate the partial derivatives of the expected profitsby the two sides of the above formula, and get. Then, we multiply both sides simultaneously by, and get. In other words, the long-term elasticity of expected profits to the total yield is equal to the sum of the elasticity of the sown area and that of the yield per unit area. [^Back]
1 Chen, F., Fan, Q. & Gao, T. Economic Research Journal (经济研究), (11) (2010).
2 Cheng, G. & Zhu, M. Management World (管理世界), (1) (2012).
3 Cao, H., Zhang, Y. & Sun, H. Chinese Rural Economy (中国农村经济), (11) (2017).
4 Fan, G., Mu, Y., Fu, W., et al. Journal of Agrotechnical Economics (农业技术经济), (12) (2012).
5 Lin, D. & Zhu, J. Journal of Agrotechnical Economics (农业技术经济), (1) (2015).
6 Xu, J. Tribune of Study (学习论坛), (6) (2016).
7 Wei, H. Chinese Rural Economy (中国农村经济), (5) (2017).
8 Arellano, M., and S. Bond, 1991, “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”, The Review of Economic Studies, 58 (2): 277–297.
9. Arnade, C., and D. Kelch, 2007, “Estimation of Area Elasticities from a Standard Profit Function”, American Journal of Agricultural Economics, 89 (3): 727–737.
10 Brockhaus, J., J. Huang, M. Kalkuhl, J. Braun, and G. Yang, 2015, “Rice, Wheat, and Corn Supply Response in China”, 2015, Agricultural and Applied Economics Association & Western Agricultural Economics Association Annual Meeting, San Francisco, California, July 26–28, No.205988.
11 Chambers, R. G., and R. E. Just, 1989, “Estimating Multioutput Technologies”, American Journal of Agricultural Economics, 71 (4): 980–995.
12 Colman, D., 1983, “A Review of the Arts of Supply Response Analysis”, Review of Marketing and Agricultural Economics, 51 (3): 201–230.
13 Colby, H.; X. Diao, and A. Somwaru, 2000, “Cross-commodity Analysis of China’s Grain Sector: Sources of Growth and Supply Response”, Department of Agriculture, Economic Research Service, Market and Trade Economics Division, Technical Bulletin No.1884, https://naldc.nal.usda.gov/download/34813/PDF.
14 Diewert, W. E., and T. J. Wales, 1987, “Flexible Functional Forms and Global Curvature Conditions”, Econometrica, 55 (1): 43–68.
15 Haile, M. G., M. Kalkuhl, and J. von Braun, 2015, “Worldwide Acreage and Yield Response to International Price Change and Volatility: A Dynamic Panel Data Analysis for Wheat, Rice, Corn, and Soybeans”, American Journal of Agricultural Economics, 98 (1): 172–190.
16 Kanwar, S., and E. Sadoulet, 2008, “Dynamic Output Response Revisited: The Indian Cash Crops”, The Developing Economies, 46 (3): 217–241.
17 Lahiri, A. K., and P. Roy, 1985, “Rainfall and Supply-response: A Study of Rice in India”, Journal of Development Economics, 18 (2): 315–334.
18 Narayana, N. S. S., and K. S. Parikh, 1981, “Estimation of Farm Supply Response and Acreage Allocation: A Case Study of Indian Agriculture”, IIASAWorking Paper WP-80-007, http://pure.iiasa.ac.at/id/eprint/1558/1/RR-81-001.pdf.
19 Nerlove, M. and D. A. Bessler, 2001, “Expectations, Information and Dynamics”, in Gardner, B. and G. Rausser (eds.) Handbook of Agricultural Economics 1A, Amsterdam: Elsevier Science, pp. 155–206.
20 Rosegrant, M. W., F. Kasryno, and N. D. Perez, 1998, “Output Response to Prices and Public Investment in Agriculture: Indonesian Food Crops”, Journal of Development Economics, 55 (2): 333–352.
21 Sadoulet, E. D., and A. Janvry, 1995, “Quantitative Development Policy Analysis”, The Johns Hopkins University Press, Baltimore, Maryland.