1. Feng Shuyi Nico Heerink Ruerd Ruben
Land and Labour Market Imperfections and Allocative Efficiency in Chinese Agriculture
Feng Shuyi
Nico Heerink
Ruerd Ruben

2. Introduction Growing inequality in China: Rural – urban income gap:
1 : 2.2 (1990) → 1 : 3.2 (2005)
Strong increase rural inequality since mid-1980s
Inequality within villages:
Gini = 0.40 – 0.42 (3 villages in Guizhou, 2005)
Why do some regions / groups lag behind?
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3. Introduction Economic theory If factors move freely:
marginal returns are equalized
labour productivity and p.c. incomes converge between and within regions
Rural markets in China:
commodity markets increasingly integrated
major bottlenecks in factor markets (land, labour, capital)
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4. Introduction
Objective of study: Assess the impact of land and labour market imperfections on allocative (in)efficiency in agriculture at village level
Rationale
If land and labour market imperfections exist:
marginal products of land and labour are determined by own land and labour resources (allocative inefficiency)
labour intensity & farm productivity will show inverse relationship with farm size
removal of barriers can contribute to efficiency & equity
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5. Approach Methodology:
Household groups distinguished according to participation in land and/or off-farm labour market (migration & local off-farm)
Labour intensity in grain production explained for each group from:
contracted land size
other variables (household characteristics, transaction costs, fixed factors, village dummies)
Household groups are allocative efficient if contracted land size has no impact on labour intensity
Expectation: only no land & labour market group is inefficient
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6. Approach
Data:
Survey among 329 farm households in 3 villages in Northeast Jiangxi Province
Relatively poor, major rice producing area
Seven household groups distinguished
Table 1: Percentage distribution of factor market participation
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7. Estimated coefficient ‘Contracted land size’
Regression results
Labour
market
Land
renting
Estimated coefficient
‘Contracted land size’
t-value No
-1.92***
-3.54 In
0.13
0.46
Local off-farm
-0.68***
-4.03
-0.07
-0.30
Migration
-0.34***
-2.65
1.38
Out
-0.34
-0.37
Whole sample
-0.13**
-2.36
***: significant at 0.01 level; **: significant at 0.05 level
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8. Regression results Findings:
Households that do not participate in land and labour markets are not allocative efficient
Households that do not participate in the land market, but do go for off-farm work, are not allocative efficient
Hence, these households cannot adjust their off-farm work to the optimal level
Allocative inefficiency is higher for local off-farm work (than for migration), and highest for no off-farm work
All other household groups are allocative efficient
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9. Conclusions Major conclusions:
Important to take diversity in factor market participation into account in analysing inefficiency
In our research area, 45% of the households do not participate in the land rental market & are not allocative efficient
Substantial efficiency and equity gains can be made by improving the functioning of markets for rural land (and labour)
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10. Thank you!
(谢谢!)
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