CONTROL IN A DYNAMIC ECONOMY: MODELING THE BEHAVIOR OF THE CHINESE VILLAGE LEADER

Village leaders in the Chinese reform economy are assumed to maximize a multiple-attribute utility function; their behavior is modeled in a dynamic control framework. Using village data, structural and control equations for industrial output, grain yields, capital, non-farm employment and hybrid rice are estimated. Results confirm hypotheses that village leaders are preoccupied with rural industrialization but are also concerned about maintaining high agricultural productivity to meet grain obligations.