Agricultural Policy, Climate Factors and Grain Output: Evidence From Household Survey Data in Rural China

This paper estimates a stochastic frontier function using a panel data set that includes 4 961 farmer households for the period of 2005-2009 to decompose the growth of grain production and the total factor productivity (TFP) growth at the farmer level. The empirical results show that the major contributor to the grain output growth for farmers is input growth and that its average contribution accounts for 60.92% of farmer's grain production growth in the period of 2006-2009, whereas the average contributions sourced from TFP growth and residuals are only 17.30 and 21.78%, respectively. The growth of intermediate inputs is a top contributor with an average contribution of 44.46%, followed by the planted area (18.16%), investment in fixed assets (1.05%), and labor input (-2.75%), indicating that the contribution from the farmer's input growth is mainly due to the growth of intermediate inputs and that the decline in labor inputs has become an obstacle for farmers in seeking grain output growth. Among the elements consisting of TFP growth, the contribution of technical progress is the largest (32.04%), followed by grain subsidies (8.55%), the average monthly temperature (4.26%), the average monthly precipitation (-0.88%), the adjusted scale effect (-5.66%), and growth in technical efficiency (-21.01%). In general, the contribution of climate factors and agricultural policy factor are positive and significant.