Land Rental Market and Agricultural Production Efficiency: A Bayesian Perspective
In this study we used a generalized true random effect (GTRE) stochastic frontier model to estimate the impact of land rental market on agricultural production efficiency in rural Chongqing, China. After we provide a complete description of land instituti
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Land Rental Market and Agricultural Production Efficiency: A Bayesian Perspective Haoran Yang
Abstract In this study we used a generalized true random effect (GTRE) stochastic frontier model to estimate the impact of land rental market on agricultural production efficiency in rural Chongqing, China. After we provide a complete description of land institutions and land rental market environment in the study area, we employed Bayesian methods of inference in estimation to investigate this impact. In practice we used Metropolis-within-Gibbs sampler to do the inference because it is straightforward to impose regularity conditions on production function implied by economic theory in this process. We also used cross entropy (CE) to facilitate our choice of candidate-generating density. Empirical results showed that the land rental market has the potential to transfer land from less efficient farm household to more efficient farm household, but hardly has impact on the management level of farm household who participates in the market.
38.1 Introduction The share of agricultural sector in China’s GDP is declining over the last thirty years, while people who used to live on agriculture didn’t decrease proportionally, which is one of the reasons of persistent rural-urban inequality in China. Economic theory suggests that a functioning land rental market can improve agricultural production efficiency and raise income of farmers, whereas land rental market in developing countries like China never functions properly. This leaves us the questions if land rental market can promote agricultural productivity in China and which factors may affect the functioning of land rental market. The impact of land rental market on agricultural production efficiency is twofold: one is that
H. Yang () Center for Development Research(ZEF), Walter-Flex-Str.3, Bonn, Germany e-mail: [email protected] 197 E. Lanzarone and F. Ieva (eds.), The Contribution of Young Researchers to Bayesian Statistics, Springer Proceedings in Mathematics & Statistics 63, DOI 10.1007/978-3-319-02084-6__38, © Springer International Publishing Switzerland 2014
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H. Yang
if land rental market can transfer land from less efficient farm households (LFHs) to more efficient farm households (MFHs); another is that if land rental market can improve technical efficiency of a typical farm household. These are the two research questions we are going to investigate in this study.
38.2 Research Methodology We used stochastic frontier model to analyze the impact of land rental market on agricultural productivity. The GTRE model can incorporate time-varying technical efficiency and persistent technical efficiency in a systematical way [3]. We use Bayesian statistics in estimation, because it is straightforward to impose curvature constraints suggested by economic theory [4] and it holds good property for small sample size [5] in Bayesian procedure. The GTRE model has the form yit = f (xit ; β) + αi + vi + uit − zi where yit is the output of farm i (i = 1, . . . , I) at year
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