SOURCES OF GROWTH AND SUPPLY RESPONSE: A CROSS-COMMODITY ANALYSIS OF CHINA'S GRAIN SECTOR

A growth accounting method is used to analyze the sources of growth in China's rice, wheat, corn and soybeans, the four most important crops in China's grain sector, during 1978-97. A large TFP contribution to growth in grain production is found in the period immediately following China's rural economic reform (1978-85). In recent years the growth rate of TFP falls sharply, contributing less than 20 percent of growth in grain production, as increased use of inputs became the major engine of growth. If the current government policy environment remains unchanged, China's grain production will become increasingly costly and constrain future growth and competitiveness in world grain markets. The supply response of the four grains is estimated using a multiproduct framework. The parametric approach shows a joint production system in China's grain sector and gross complementarity in the effect of a price change on the supply of outputs and demand for inputs.