Subsidies and distortions in China’s agriculture: evidence from producer-level data
2017
Huang, Jikun | Wang, Xiaobing | Zhi, Huayong | Huang, Zhurong | Rozelle, Scott
Concerned about national grain self-sufficiency and rural household incomes, in 2004China announced that it was planning to reverse its longstanding policy of taxing farmhouseholds and instead began to provide them with subsidies. Over the past five years,annual announcements have trumpeted rises in subsidies. Surprisingly, despite the historicturnaround of policy and the likely implication of this subsidy policy to China’sgrain economy, there has been no household-level survey-based research that hassought to understand the effect of China’s subsidy programme on household behaviour.Using data from a national survey of more than 1000 households, we examine indetail a number of different dimensions of the subsidy programme. According to thesurvey-based findings, we have shown that although agricultural subsidies per farmare low, on per unit of cultivated area basis or total amount of budget, the subsidiesare high. Almost all producers are receiving them. Subsidies are mostly being given tothe land contractor, not the tiller. Most importantly, the subsidies appear to be nondistorting.No matter if we look at descriptive statistics in tables, scatter plots orregression analyses, there is no evidence that grain subsidies are distorting producerdecisions in terms of grain area or input use decisions.
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