The impact of price regulations on regional welfare and agricultural productivity in China

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Selim, Sheikh Tareq ; Cardiff University (2011)
  • Publisher: Cardiff University
  • Subject: HD28 | JQ | H1 | HD | HV
    mesheuropmc: food and beverages | health care economics and organizations

The nineties' agricultural reform in China that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of in�ation in agricultural prices; this apparently motivated the government to take over the control of agricultural prices in 1998. We examine how and to what extent this reform a¤ected the productivity and welfare of grain farmers in China at the regional level. We fi�nd that the price regulation that destroyed the incentive to exert more effort adversely affected the growth in agricultural productivity but contributed to the growth in farmers' welfare. Although the price regulations resulted in short term improvement in welfare across all the regions, for the\ud long run such regulations can result in larger drop in agricultural production because of its negative impact\ud on incentives to produce more.
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