Jiawu Dai, Xiuqing Wang and Guang Yuan
The effect of market power on allocative efficiency is one of the most important topics in industrial organization and has undergone rigorous investigation since the 1970s…
Abstract
Purpose
The effect of market power on allocative efficiency is one of the most important topics in industrial organization and has undergone rigorous investigation since the 1970s. However, empirical studies based on firm-level data are relatively rare, especially with regard to China's tobacco and food industries. Accordingly, this research measures market power and allocative efficiency loss (AEL) of the main tobacco and food industries in China with micro data at firm level. Subsequently, it conducts a comparative analysis on them.
Design/methodology/approach
This research applies the New Empirical Industrial Organization (NEIO) model, consisting of five pricing and demand simultaneous equations to measure market power, and the AEL model to measure AEL induced by market power. To match with the micro data at firm level, the study implements a change in the traditional NEIO model by abandoning the aggregating process.
Findings
Empirical results show that China's tobacco industry, among five sectors selected, has the largest market power and thus the highest degree of AEL, whereas other sectors have apparently smaller market power and lower levels of AEL. Comparative analysis demonstrates a coarse positive correlation between market power and AEL in the selected industries. In general, the results accord well with the existing empirical findings and the reality.
Research limitations/implications
This study has some deficiencies. First, owing to the limitation of high-quality data, the sectors analyzed in this research are insufficient to sum up all the characteristics and rules of China's whole food industry. Second, this research only analyzes seller market power and leaves out buyer market power, which could be a direction for future research.
Practical implications
The relevant administrations should strictly limit the monopoly behaviors of enterprises and establish a favorable and competitive market environment, especially for the tobacco industry. This suggestion is precisely an important content of China's Supply-side Reform.
Originality/value
The research improves the NEIO model in that it can be estimated with micro data at firm level. To the best knowledge of the authors, very few empirical and comparative analyses exist on market power and AEL for China's tobacco and food manufacturers using micro data.
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Ling Ma, Alexander Nuetah and Xiuqing Wang
The purpose of this paper is to investigate the role of market power and returns to scale in the determination of farm-value share.
Abstract
Purpose
The purpose of this paper is to investigate the role of market power and returns to scale in the determination of farm-value share.
Design/methodology/approach
This paper utilizes the equilibrium displacement model to investigate the role of market power and returns to scale in the determination of farm-value share. Contrary to the current literature, the paper incorporates oligopoly power, oligopsony power and non-constant return to scale into one generalized model, which systematically enables us investigate the impacts of market power on the determination and changes of farm-value share.
Findings
The results imply that market power as well as non-constant returns to scale is central to the understanding of farm-value share. These, in turn, indicate that ignoring the impacts of market power and degree of return to scale may overestimate or underestimate the impacts of exogenous shocks on changes in farm-value share.
Originality/value
Thus, to the best of the authors’ knowledge, no literature has examined the co-existence of oligopsony power, oligopoly power as well as non-constant return to scale in farm-value share determination. This paper therefore tries to fill this gap.
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Qianqian Zhang, Faqin Lin, Xiuqing Wang and Xian Xin
The purpose of this paper is to present an oligopolistic version of the cobweb model that departs from the strict assumptions of perfect competition in the traditional cobweb…
Abstract
Purpose
The purpose of this paper is to present an oligopolistic version of the cobweb model that departs from the strict assumptions of perfect competition in the traditional cobweb model.
Design/methodology/approach
Introducing a model where n identical producers engage in Cournot competition, with output decisions influencing market prices. The paper retains the original assumptions of naive expectations and a linear model where price expectations of Cournot competitors are made simultaneously with production decisions. The investigation focuses on the model's behavior as the number of producers decreases or industry concentration increases. The authors also show empirical evidence when drawing the data from the pig sector in China and the USA.
Findings
The findings indicate that the cobweb model undergoes a transition from divergent to continuous and even convergent as the number of producers decreases or industry concentration increases. The incorporation of costs related to entry and exit from the market contributes to achieving a more stable equilibrium state.
Originality/value
The cobweb model has been primarily studied in an idealized market structure of perfect competition, and the assumptions that they share are not obviously appropriate to many agriculture markets. This study presents an alternative version of the cobweb model in an oligopolistic market that relaxes the strict assumptions of perfect competition. The authors show the dynamics of reduced competitor numbers or increased industry concentration on the convergence of the cobweb model based on subtle variations in parameters.
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This paper aims to investigate how to promote the agricultural insurance amid the "new normal" of economic development.
Abstract
Purpose
This paper aims to investigate how to promote the agricultural insurance amid the "new normal" of economic development.
Design/methodology/approach
This paper reviewed the achievements and experiences of China agricultural insurance development in the past eight years, deeply analyzed the problems during the development and proposed several solutions.
Findings
During 2007-2014, the development of China agricultural insurance has made significant accomplishments and achieved important experience; however, problems also emerged during the process, such as blurry boundaries between government and market, unclear policy target, disordered market competition and improper management. To solve these problems and promote China agricultural insurance, efforts should be put more on fiscal taxation policy, government department coordination, catastrophe risk dispersion system, maintaining orderly competition, regulating management and strengthening innovation.
Originality/value
This paper makes a systematic analysis on the experiences, problems and solutions for China agriculture insurance during 2007-2014, which is of great significance to promote China agriculture insurance development.
Yuan feng Zhao, Zhihui Chai, Michael S Delgado and Paul V Preckel
The purpose of this paper is to assess the effect of crop insurance on farmer income in Inner Mongolia, China
Abstract
Purpose
The purpose of this paper is to assess the effect of crop insurance on farmer income in Inner Mongolia, China
Design/methodology/approach
We use a survey of farmers in Inner Mongolia, China, with difference-in-difference, propensity score matching, and hybrid propensity score matching difference-in-difference treatment effect estimators to assess the effectiveness of crop insurance on farmer income.
Findings
The empirical results show that crop insurance does not significantly affect farmer income under the current policy of “low-premium, wide-coverage, low-guarantee and low-indemnity.”
Research limitations/implications
A possible limitation of this study is that the data includes only one geographic area, Inner Mongolia, China, and so results may not generalize to other regions of China.
Practical implications
This research provides empirical estimates of the impact of crop insurance on farm household income. Given the results, we speculate that a number of specific changes to the crop insurance program might increase its positive impacts.
Originality/value
We believe this is the first study to use individual farm household level survey data to evaluate the impact of crop insurance on farmer income in China.
In Taiwan, owing to the defects of the management system, the percentage of non-performing loans of the Credit Departments of Farmers’ Associations (CDFAs) has increased markedly…
Abstract
Purpose
In Taiwan, owing to the defects of the management system, the percentage of non-performing loans of the Credit Departments of Farmers’ Associations (CDFAs) has increased markedly. The government has thus imposed a series of financial reforms on them over the years. It is necessary to examine the influence of public policies on the CDFAs’ performance and check if they are a driving force or obstruction?
Design/methodology/approach
This study uses the generalized meta-frontier Malmquist productivity index framework to estimate the productivity dynamics for various types of CDFAs during 2000-2009. Moreover, the proposition of whether financial supervision and structural change played the role of driving force or obstruction on productivity changes of CDFAs is also examined.
Findings
The empirical results show that the productivity of CDFAs decreased year on year despite the policies. The sources resulting in the decline were mainly from technical change and technical efficiency. Meanwhile, the productivity performance of urban Farmers’ Associations was the best, followed by that of rural and hybrid ones. As for the determinants, it was found that small financial reforms and the financial tsunami caused a decrease in the productivity of CDFAs. Furthermore, increasing the number of competitive financial institutions, expanding the scale of the arable lands of peasant households, increasing the proportion of dry lands, decreasing the area of fallow lands and increasing the ratio of peasant households helped increase the productivity of CDFAs.
Originality/value
This study uses the generalized Meta-frontier Malmquist Productivity Index model to observe productivity dynamics in order to analyze changes in the productivity of different types of CDFAs
Economic reforms in rural China have led to the emergence of land and labor markets. The development of rural land rental markets can improve agricultural productivity and equity…
Abstract
Purpose
Economic reforms in rural China have led to the emergence of land and labor markets. The development of rural land rental markets can improve agricultural productivity and equity by facilitating transfers of land to more productive farmers and facilitating the participation in the non-farm economy of less productive farmers. In contrast to the burgeoning development of off-farm labor markets, the development of rural land rental market has lagged. The purpose of this study is to analyze the factors affecting households’ entry and transaction intensity in rural land rental markets, especially the effects of land tenure and off-farm employment.
Design/methodology/approach
Based on a field survey data of 479 household in Henan Province in 2009, the authors used Cragg’s double hurdle model to identify the determinants for households’ land rental participation and its transaction amount.
Findings
Off-farm employment is one of main driving factor for household’s land rent-out decision. Tenure insecurity reduces both the propensity and the magnitude of rental market transactions. Land use certificates significantly contribute to participation in land-rental markets and the rental amount.
Originality/value
This paper treats household land rental market participation as a related two-step process, focusing on both land transfer and its transaction amount. This paper also builds on a broad view, including analysis on both demand and supply side of land rental market.
Xiaoyun Liu, Wanchun Luo, Xuefeng Mao, Xiuqing Wang and Xian Xin
The paper aims to assess the impact of agricultural output changes on the general price level over time with China as an example.
Abstract
Purpose
The paper aims to assess the impact of agricultural output changes on the general price level over time with China as an example.
Design/methodology/approach
A simple numerical global general equilibrium (GE) model of two regions (China and the rest of the world) and three commodities (agriculture, manufacturing goods, and services) is used to assess the impacts of agricultural output changes on the overall economy price changes. The numerical GE model of this paper consists of production, final consumption, and market clear conditions. The results are generated with the GE model calibrated to aggregated China's input‐output tables of 1987, 1997, and 2005.
Findings
The results suggest that China witnessed a declining influence of agricultural output changes on general price changes. The contribution of given agricultural output change on the general price change in 2005 was merely less than 60 percent of that in 1987, which in turn implies that macro policies targeting to curb general inflation via boosting agricultural output will be less effective as those of 20 years ago.
Practical implications
China's policy makers should rely less and less on promoting agricultural output policies to fight against general inflation and should resort to non‐agricultural policies.
Originality/value
The paper argues that the influence of agriculture on the China's general price indices has been weakening along with China's economic development with a numerical GE model calibrated to aggregated China's input‐output tables of 1987, 1997, and 2005.