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Abstract
The introduction of direct subsidies to farming households and the development of farmer cooperatives has provided two important approaches to China’s twenty-first century food policy challenges. However, research undertaken largely separates and focuses on subsidies or cooperatives. This neglects their interaction and complementarities. This article seeks to rectify this omission using a survey from 35 farmer specialized cooperatives (FSCs) and 561 farming households in 16 provinces, based on a two-stage treatment effect model. The findings suggest FSCs have become important organizations that improve farmers’ net income. Moreover, usage of agricultural machinery and direct subsidies also result in higher net income, though they have little impact on farmers’ machinery investment. The results provide an evidence source that contributes to debate concerning government subsidy policy. Policy may act more like an income transfer program, since it has little impact on farmers’ investment in agriculture. The study also highlights that there are complementary effects between FSCs and direct subsidies, and that China’s cooperative policy integrated with direct subsidies could be progressive.
Acknowledgments
The authors are grateful to Professor Jamie Morgan of Leeds Beckett University for his inspiration and support, and to Professor Hung-gay Fung, the editor-in-chief of Chinese Economy for his constructive comments and useful guidance.
Notes
1 Rural migrant numbers reached 225.42 million in 2008 (NBSC Citation2009; cited in Gui, Berry, & Zheng, Citation2012), of which most are educated young people who were attracted by higher income, living styles, and life prospects in urban cities.
3 The four main general categories introduced (with subcategories in each) have been: “grain subsidy” (liangshi butie), “comprehensive (aggregated) input subsidy” (nongzi zonghe butie), “quality seed subsidy” (liangzhong butie), and “agricultural machinery subsidy” (nongjiju butie).
4 ”Grain subsidy,” “comprehensive (aggregated) input subsidy,” and “quality seed subsidy” have since been combined and are now termed the “agriculture support and protection subsidy.”
5 The subsidies as a proportion of agricultural output were increased in the same period from 0.7% in 2004 to 3.47% in 2009.
7 However, as with any piece of research, ours has a series of limitations: (1) our sample focuses mainly on cash crop FSCs with omission of others; (2) the sample does not distinguish different varieties of subsidy, but rather relies on the standardized national distribution of those subsidies; (3) though we maintain that the our survey is geographically more extensive than previous research, the use of selected and trained students to deliver the survey does restrict the timing of that research to particular periods in the year.
8 In other word, we selected the sample generally and proportionally based on the numbers of FSCs in different provinces. For example, eastern China has the highest numbers of FSCs compared to those in the central and western areas; our sample was thus selected to reflect the shape. However, some provinces have not been included due to data unavailability.
9 Migrant farmers refer to heads of farmer households who work full-time in another place and left other family members engaged in agriculture or rent their farmland to others. During this period, most farmer migrants go back to rural villages for Chinese New Year from urban cities so that we can capture them in the survey.
10 Non-FSC member, migrant, and western are allowed for based on standard statistical procedures (see Freedman Citation2010).
11 The use of an exclusion variable to manage endogeneity in econometric analysis inevitably creates disputes regarding what to select and whether one might opt for Heckman correction. See Freedman (Citation2010).
12 http://china.caixin.com/2014-12-30/100769339.html. (accessed 30 July 2015).
13 Note, one can distinguish the majority of small scale FSCs operating within a single village or restricted locality from large scale and more commercial FSCs of three kinds based on consolidation and perhaps vertical integration within stages of a supply chain: (1) production oriented FSCs with a trademarked output and stable sales channels; 2) sales and distribution FSCs; and (3) production-processing-marketing FSCs. Those three kinds are more capital intensive than smaller local FSCs and are liable to have more significant associations between FSC status and investment levels (See Wu Citation2011). However, these are not the focus of our research.
14 As previously noted, the majority farming household subsidy has been for grain and this has typically been distributed to the registered land contractee (who may or may not be the land user).
15 See also http://china.caixin.com/2014-12-30/100769339.html, accessed July 30, 2015.