Recent evidence on agricultural efficiency and productivity in China: a metafrontier approach

Economic reform in China helped transform the structure and volume of agricultural production and resulted in significant changes in efficiency and productivity. This paper measures agricultural technical efficiency (TE) and total factor productivity (TFP) in China by allowing producers operating under their own technologies. A metafrontier function approach is applied using a panel data set on 28 provinces during 1991-2005. The provinces are categorized into advanced-technology and low-technology provinces. Based on the metafrontier estimation, TFP growth is decomposed into TE change (TEC), technical change (TC) and scale efficiency change (SEC). This information is useful for policy makers to design suitable policies in enhancing agricultural TE and TFP growth in China. Our major findings indicate that TC was mostly attributed to Chinese agricultural TFP growth throughout the period of study. SEC and TEC exhibited negative effects to TFP growth for the advance- and low-technology provinces, respectively. Most of the advanced-technology provinces exhibited higher TE than the low-technology provinces. The comparatively low TE scores in the low-technology provinces imply that the low-technology provinces were operating far from the metafrontier. The fluctuation of TE measured with respect to the metafrontier function indicates it is possible that Chinese agricultural TFP growth can be improved through the improvement of TE. The results also show that labor and fertilizer still make important contributions to output, and thus improving the quality of farmers and applying modern physical inputs is also crucial to TFP growth.