Production Efficiency and Productivity Change in Chinese Agriculture: A Case Study of Agricultural Production in Shanxi Province

This dissertation studies the production efficiency and productivity of agriculture in Shanxi province after Chinese economic reforms. The main question about the economic aspects of agriculture we want to address is the performance of Chinese agriculture since 1980. We use a newly constructed county-level input and output quantity data set to obtain technical efficiency and measure the Malmquist productivity index and its components. We first use the nonparametric method of Data Envelopment Analysis (DEA) to obtain Pareto-Koopmans measures of technical efficiency of individual counties in Shanxi province during year 1981-2010 in a multi-output, multi-input production framework. We disaggregate overall efficiency into two components representing output and input efficiencies and evaluate the contribution of individual outputs and inputs to the measured level of overall efficiency. We also examine the utilization of modern agricultural inputs compared to the traditional inputs. Next, We investigate the temporal and spatial nature of productivity growth of Chinese agriculture in Shanxi province. The results indicate that growth in the Malmquist productivity index over the 1983–2010 periods was 1.2% annually for the entire province. Decomposition of the Malmquist productivity index shows that technical change contributed to the growth in productivity by 0.8% per year, while efficiency change increased productivity by 0.4% per year. The results also show that the Malmquist index of productivity changes is fast-, moderate- and slow-growing in different groups. The trend of the growth of productivity is also explained in this dissertation. Finally, across county variation in the DEA measure of efficiency and its components is investigated. We identify a number of important factors and discuss their relevance as determinants of efficiency in agricultural production in Shanxi province. We also evaluate the impact of three important policy changes (named, China’s admission to WTO (2001), abolition of agricultural tax (2006), and subsidization of agricultural machinery (2007)) on agricultural efficiency at both national and county level. An analysis of the measured efficiency level can help to identify factors that enhance or hinder efficient resource utilization. This becomes helpful for public policy for improving efficiency