Property Rights, Labour Markets, and Efficiency in a Transition Economy: The Case of Rural China

This paper investigates the consequences of imperfect and uneven factor market development for farm efficiency in rural China during transition. In particular, we estimate the extent to which an inverse relationship in farm productivity can be attributed to the administrative (instead of market) allocation of land, and the extent of unevenly developed non-agricultural opportunities. Using a recently collected household survey, we show that a considerable amount of inefficiency exists in the countryside, especially in the employment of labour. Our results show that this inefficiency is alleviated by the development of external labour markets, and that in the context of the current imperfect market environment, administrative reallocations help improve on the margin both efficiency and equity. They do not go far enough, however, which raises important questions about constraints on rental activity, the link between admin istrative reallocation and decentralized land exchange, and property rights formation more generally.http://deepblue.lib.umich.edu/bitstream/2027.42/39903/3/wp518.pd

Agriculture and Income Distribution in Rural Vietnam under Economic Reforms: A Tale of Two Regions

This paper exploits the panel dimension of the Vietnam Living Standards Survey (VLSS) in order to analyze the main changes occurring in agriculture in Vietnam over the period 1993- 1998. This period was marked by a continuation of the reforms that began in 1988 with the implementation of Resolution 10, Vietnam’s own version of the Chinese Household Responsibility System. We focus on the impact of two main policy changes: first, the increase in the rice export quota and the significant increase in the price of rice, especially in the south; second, liberalization of the fertilizer market and the sharp drop in the price of fertilizer. To this end, we document changes in the empirically observable “institutional environment,” exploring changes in rice and other crop prices as well as fertilizer prices. With this as background, we explore changes in r ice production, consumption and marketing, and their links to changes in prices and incomes. We also estimate the degree to which these increases can be “explained” by increased use of inputs like fertilizer, cropping intensity, and increased yields. Finally, we investigate the distributional impacts of these changes, including a detailed examination of the linkages between rice marketing and income distribution using nonparametric econometric techniques. We find that the agricultural reforms had a largely beneficial impact on the well being of rural households throughout Vietnam, but that farmers in the south gained most, consistent with expectations given the policy changes. More generally, our conclusions suggest that market reforms can have a significant impact on incentives, without adverse consequences for income distribution.http://deepblue.lib.umich.edu/bitstream/2027.42/39904/3/wp519.pd

Property Rights, Labour Markets, and Efficiency in a Transition Economy: The Case of Rural China

This paper investigates the consequences of imperfect and uneven factor market development for farm efficiency in rural China during transition. In particular, we estimate the extent to which an inverse relationship in farm productivity can be attributed to the administrative (instead of market) allocation of land, and the extent of unevenly developed non-agricultural opportunities. Using a recently collected household survey, we show that a considerable amount of inefficiency exists in the countryside, especially in the employment of labour. Our results show that this inefficiency is alleviated by the development of external labour markets, and that in the context of the current imperfect market environment, administrative reallocations help improve on the margin both efficiency and equity. They do not go far enough, however, which raises important questions about constraints on rental activity, the link between admin istrative reallocation and decentralized land exchange, and property rights formation more generally.Rural institutions, property rights, labour markets, transition economies, farm efficiency

Property Rights, Labor Markets, and Efficiency in a Transition Economy: The Case of Rural China

This paper investigates the consequences of imperfect and uneven factor market development for farm efficiency in rural China. In particular, we estimate the extent to which an inverse relationship in farm productivity can be attributed to the administrative (instead of market) allocation of land, and the extent of unevenly developed non-agricultural opportunities. Using a recently collected household survey, we show that a considerable amount of inefficiency exists in the countryside, especially in the employment of labor. Our results show that this inefficiency is alleviated by the development of external labor markets, but perhaps more surprisingly, that in the context of the current imperfect market environment, administrative reallocations help improve both efficiency and equity on the margin. They do not go far enough, however, which raises important questions about constraints on rental activity and the link between administrative reallocation and decentralized land exchange.

Agriculture and Income Distribution in Rural Vietnam under Economic Reforms: A Tale of Two Regions

This paper exploits the panel dimension of the Vietnam Living Standards Survey (VLSS) in order to analyze the main changes occurring in agriculture in Vietnam over the period 1993-1998. This period was marked by a continuation of the reforms that began in 1988 with the implementation of Resolution 10, Vietnam s own version of the Chinese Household Responsibility System. We focus on the impact of two main policy changes: first, the increase in the rice export quota and the significant increase in the price of rice, especially in the south; and second, the liberalization of the fertilizer market and the sharp drop in the price of fertilizer. To this end, we document changes in the empirically observable institutional environment, exploring changes in rice and other crop prices as well as fertilizer prices. With this as background, we examine changes in rice production, consumption and marketing, and their links to changes in prices and incomes. We also estimate the degree to which these increases can be explained by increased use of inputs like fertilizer, cropping intensity, and increased yields. Finally, we investigate the distributional impacts of these changes, including a detailed examination of the linkages between rice marketing and income distribution using nonparametric econometric techniques. We find that the agricultural reforms had a largely beneficial impact on the well being of rural households throughout Vietnam, but that farmers in the south gained most, consistent with expectations given the policy changes. More generally, our conclusions suggest that market reforms can have a significant impact on incentives, without adverse consequences for income distribution.economic reforms in Vietnam; trade liberalization; agricultural productivity; welfare distribution

The Evolution of Income Inequality in Rural China

We document the evolution of the income distribution in rural China, from 1987 through 1999, with an emphasis on investigating increases in inequality associated with transition and economic development. With a backdrop of perceived improvements in average living standards, we ask whether increases of inequality may have offset, or even threaten welfare gains associated with economic reforms. The centerpiece of the paper is an empirical analysis based on a set of household surveys conducted by the China’s Research Center for Rural Economy (RCRE) in Beijing. These surveys permit us to construct a set of comparable estimates of household income and consumption from a panel of over 100 villages from nine Chinese provinces. We provide a variety of summary statistics, including Gini coefficients, as well as more nonparametric summaries of the income distribution (i.e., Lorenz curves). In addition, we decompose the sources of inequality, exploring the contributions of spatial inequality to overall inequality, and the role of non-agricultural incomes in explaining rising dispersion of incomes. We find that the distribution of income improved by most measures during the early part of the period, as average incomes rose substantially with only a modest increase in inequality. However, the distribution has worsened significantly since 1995, with rising inequality, and falling absolute incomes, especially at the bottom end of the income distribution. We attribute most of the recent decline in welfare to collapsing agricultural incomes, probably brought about by lower farm prices. At the same time, increasing non-farm incomes have widened the gaps between those with and without access to nonagricultural opportunities. Based on explorations with different data sets, our RCRE-based results probably understate the divergence due to non-agricultural income growth and the increase in inequality over time. Our results highlight the need for further evaluation of the role of farming as a source of income in the countryside, and also underline the limitations of a land-based (and essentially grain-based) income support and redistribution mechanisms.http://deepblue.lib.umich.edu/bitstream/2027.42/40040/3/wp654.pd

Ceaseless Toil? Health and Labor Supply of the Elderly in Rural China

Deborah Davis-Friedmann (1991) described the “retirement” pattern of the Chinese elderly in the prereform era as “ceaseless toil”: lacking sufficient means of support, the elderly had to work their entire lives. In this paper we re-cast the metaphor of ceaseless toil in a labor supply model, where we highlight the role of age and deteriorating health. The empirical focus of our paper is (1) Documenting the labor supply patterns of elderly Chinese; and (2) Estimating the extent to which failing health drives retirement. We exploit the panel dimension of the 1991-93-97 waves of the China Health and Nutrition Survey, confronting a number of econometric issues, especially the possible contamination of age by cohort effects, and the measurement error of health. In the end, it appears that “ceaseless toil” is also an accurate depiction of elderly Chinese work patterns since economic reform, but failing health only plays a small observable role in explaining declining labor supply over the life-cycle.http://deepblue.lib.umich.edu/bitstream/2027.42/39965/3/wp579.pd

The Evolution of Income Inequality in Rural China

We document the evolution of the income distribution in rural China, from 1987 through 1999, with an emphasis on investigating increases in inequality associated with transition and economic development. With a backdrop of perceived improvements in average living standards, we ask whether increases of inequality may have offset, or even threaten welfare gains associated with economic reforms. The centerpiece of the paper is an empirical analysis based on a set of household surveys conducted by the China’s Research Center for Rural Economy (RCRE) in Beijing. These surveys permit us to construct a set of comparable estimates of household income and consumption from a panel of over 100 villages from nine Chinese provinces. We provide a variety of summary statistics, including Gini coefficients, as well as more nonparametric summaries of the income distribution (i.e., Lorenz curves). In addition, we decompose the sources of inequality, exploring the contributions of spatial inequality to overall inequality, and the role of non-agricultural incomes in explaining rising dispersion of incomes. We find that the distribution of income improved by most measures during the early part of the period, as average incomes rose substantially with only a modest increase in inequality. However, the distribution has worsened significantly since 1995, with rising inequality, and falling absolute incomes, especially at the bottom end of the income distribution. We attribute most of the recent decline in welfare to collapsing agricultural incomes, probably brought about by lower farm prices. At the same time, increasing non-farm incomes have widened the gaps between those with and without access to nonagricultural opportunities. Based on explorations with different data sets, our RCRE-based results probably understate the divergence due to non-agricultural income growth and the increase in inequality over time. Our results highlight the need for further evaluation of the role of farming as a source of income in the countryside, and also underline the limitations of a land-based (and essentially grain-based) income support and redistribution mechanisms.Rural inequality; China; welfare and transition; poverty; farm incomes

Inequality and Growth in Rural China: Does Higher Inequality Impede Growth?

We explore the relationship between the level of village inequality in 1986, and the subsequent growth of household incomes from 1986 to 1999. Using a detailed household-level data set from rural China, we find robust evidence that initial inequality is negatively related to subsequent household income growth. We are able to address a number of econometric issues that affect the use of aggregate data for this exercise, especially measurement error and aggregation: Our results strongly suggest that village inequality has an external adverse impact on household-level income trajectories. However, once we account for possibly fixed village-level unobserved heterogeneity, we find no evidence that changes in inequality are correlated with household income growth: Whatever factor drives the inequality-growth relationship only operates in the “long run.” We explore several possible avenues by which initial inequality – or an unobserved variable correlated with it – affects household income growth. While we do not find the precise mechanism, our findings point toward a class of explanations based on collective choice (like the provision of public goods or determination of local taxes), and away from credit-market based explanations.Inequality; Growth; Rural China; Panel Data

AGING, WELL-BEING, AND SOCIAL SECURITY IN RURAL NORTH CHINA

We explore the economic position of the elderly in rural North China. In particular, we examine the work patterns and incomes attributable to the elderly, and explore the role of extended families in protecting the welfare of the elderly. Our objective is to document the channels by which private, family-based social security exists in rural China. Drawing upon a 1995 household survey, as well employing household surveys from 1935 and 1989 as benchmarks, we show that extended families, while still important, play a smaller role than in the "glory days" of extended families. We also show that urban-rural distinctions in terms of the role of the family are not very important. The primary difference is that the urban elderly live in higher income households, to some extent because of their more generous state-funded pensions. The main conclusion from our analysis is that the rural elderly merit considerably more attention than has been paid to them, and that it would be unwise to assume that "filial piety" will guarantee the living standards of elderly in rural areas.