It is generally accepted that the rapid output growth in China’s agriculture from 1979 to
1984 was due to significant productivity gain.1
In most developing countries such as China,
agricultural productivity gains are central to the growth of national wealth, enabling the diversion
of agricultural labor into producing non-agricultural products, leading to higher real per capita
incomes.2
The continuation of agricultural productivity growth in China is particularly important, as
more than 300 million workers remain in agriculture (nearly 50 percent of the country’s total
labor force).3
An increase in rural incomes, through further agricultural productivity gains, would
not only help close the urban-rural income gap, 4
but it would also serve as an important source
of national economic growth. The coastal-centered economic boom has recently slowed down
and the ongoing reform of China’s state owned enterprises has resulted in 150 million
unemployed city residents.5
This means that policy will continue to discourage labor movement
from the countryside to the cities and therefore the rural economy itself will be viewed as a key
to future national economic growth.
Not only is labor an abundant resource in rural China, but a large percentage of the labor
force is also used in grain production. However, grain cultivation is a relatively low-return
activity, and the marginal labor productivity in grain is thought to be low. Further economic
reforms in the countryside would encourage farmers to withdraw from grain in favor of other
forms of crops or activities. However, major agricultural reforms are on the back burner. From
1998, the central government reasserted its emphasis on "grain self-sufficiency" and introduced
renewed government control over grain prices, by prohibiting private agents in the grain market.6
According to national aggregate data, total factor productivity (TFP) in China’s
agriculture increased by 55 percent from 1979 to 1984.7
This was unprecedented in the
developing world, and most of the rapid change was attributed to the Household Responsibility
System (HRS), which was a one-off institutional change.8
After the effects of the HRS peteredout, a policy issue that surfaced in the late 1980s and early 1990s was a slowdown in the growth
of investment in agriculture.9
Despite this apparent investment slowdown, we find, in this paper,
that the national data indicate there have been tremendous productivity gains in China in the
1990s. The TFPI increased by 47 percent from 1990 to 1996, according to the national aggregate
statistics, and using Wen’s methodology. Is this large agricultural productivity gain in the 1990s
plausible?
Perhaps the answer is no, because recent concerns over the reliability of national
production statistics calls into question the accuracy of the national productivity index.10 The
purpose of this paper is to measure post-reform agricultural productivity growth in China using
farm level (i.e., household) data and compare the results to national data, for the 1978 to 1996
time period. Measuring productivity growth is a complicated task, even in western economies
where data are much better than is the case for China. Previous studies of China’s agricultural
growth have all used very aggregate national or provincial data, even though the theory is based
on microeconomic decision-making relationships at the individual farm level. Our disaggregate
household level data are unique and they were obtained from farm cost surveys in Jiangsu
Province, one of the most progressive agricultural provinces in China.