Interaction and non-neutral effects of factors in Chinese wheat production

Interaction and non-neutral effects of factors in Chinese wheat production
Document type
Working Paper
Author(s)
Patel, Vasita; Selim, Sheikh; Parvin, Naima
Publisher
Cardiff Business School
Date of publication
1 December 2010
Series
Caediff Economics Working Papers
Subject(s)
Trends: economic, social and technology trends affecting business
Collection
Business and management
Material type
Reports

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This paper examines the role of the interaction between labour productivity and the use of factors in explaining the recent (1998-2007) 11% decline in wheat production in China. The authors employ a non-neutral stochastic production frontier approach that enables them to identify the interaction and non-neutral effects of factors that are used in wheat production. For regional level wheat production in China, the paper finds that identifying the technical inefficiency effects and the non-neutral effects of factors assist big time in explaining the recent decline in wheat production. A higher level of labour productivity can stimulate efficiency gains in production, but adding more labour to the workforce or adding to the stock of machinery power can depress this potential marginal efficiency gain. The paper also finds significant marginal efficiency gain of land reforms that add to the stock of cultivable land. The results indicate that future agricultural reforms in China should address the incentive scheme for labour.

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