Chinese Agricultural Household Farming Efficiency and Off-Farm Labor Supply

Abstract

This dissertation deals with the off-farm labor supply of Chinese agricultural households. The data used in this study are from the World Bank's 1995 North and Northeast China Living Standards Survey. The objectives are two fold. The first objective explores the relationship between the farm operators' off-farm labor supply and the household's farming efficiency, and identifies the factors affecting the farm operators' off-farm labor supply. Alternative approaches are used to measure farming efficiency. The theoretical model predicts an inverse relationship between farming efficiency and off-farm labor supply. However, the empirical results show that the crop production technical efficiency is positively related to off-farm labor supply and the agricultural production technical efficiency exhibits no significant effect on off-farm labor supply. There appears to be a surplus of labor in the agrarian sector in China. Restrictions on the movement of labor among regions and in the reallocation of farmland serve to maintain this surplus and thus bring about economic inefficiencies.

The second objective investigates the switching nature of the operator's off-farm labor supply depending on the spouse's participation status in off-farm labor markets. An endogenous switching regression model shows that the spouse's participation status is endogenous to the operator's off-farm labor supply decision. The off-farm labor supply behavior of operators with spouses working off-farm exhibits some differences from that of the operators with spouses' not working off-farm. The results support that the agricultural household is a more relevant decision unit for resource allocation than is its individual members.