Structure Change, Relative Factor Prices, and Farmers’ Behavior：Theory and Micro Evidence from Agriculture Subsidies
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| Title | Structure Change, Relative Factor Prices, and Farmers’ Behavior：Theory and Micro Evidence from Agriculture Subsidies
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| Author | Zhong Chunping, Chen Sanpan and Xu Changsheng |
| Organization | School of Economics, Huazhong University of Science and Technology |
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| Key Words | Structural Change; Subsidy; Behavior; Ordered Logistic Model |
| Abstract | Through resources reallocation and structure change among sectors, subsidies can change relative factor prices and affect resources allocation. The theoretical model shows that agriculture income subsidies and price subsidies will change relative prices and affect labor supply. However, if the subsidy is small, it can’t change comparative revenue between agriculture and non-agriculture activities where income effect dominates substitution/output effect. A survey in Yuexi District, Anhui Province, China has been conducted. It shows that subsidies improve living standards of farmers, but just tiny effect on agriculture production. Empirical test with Ordered Logistic Model confirms that subsidies increase inputs, unit outputs and farmers’ welfare, but no significant effect on productivity. Low incentive to increase input is due to low prices of agricultural products and subsidies. |
| Serial Number | WP98 |
| Time | 2011-10-27 |
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