A Study On The Effect Of Food Subsidy Policy

As part of public finance, food subsidies have been an important subject of China's economic development. Food is not only the basic necessities of life, but also the strategic basis to maintain a country's economic development and political stability which is irreplaceable. But food industry is basic industry with a characteristic weak, so it is vulnerable to natural disasters and market shocks. With a small elasticity of food demand, and a big elasticity of food supply, the imbalance of food supply and demand prones to affect market stability. Based on this, many countries in the world today, especially the developed countries have taken some food support policies.As China's grain production and business are completed mostly by individual rural households of small-scale, with low degree of specialization and low efficiency of production, the weakness and ineffectiveness of Chinese food industry are more prominent in the international market which seriously affect the competitiveness of China's food industry in the international market. Since 2001, China has joined the World Trade Organization, and then China's food industry is facing increasingly tough international challenges in the form of net outflow of agricultural production factors, namely, the lackness of capital investment in agricultural production, the scarcity of agricultural human capital of labor force and the degradation of rural financial environment. Fortunately, to increase food production and households'income, the central government have gradually pushed forward the agricultural tax reform to phase out agricultural taxes, and increased financial support to food industry to ensure national food security and the increase farmers'income since 2004. Now, tax breaks and financial subsidies have gradually become important policy arrangements to solve the "three rural" issue.But it is difficult to understand, in recent years, although the Chinese government has been increasing the food industry subsidies, householders'grain production enthusiasm do not improved significantly as well as the food production. So it is necessary for us to analyze the effects of current food subsidies, explore the reasons and thus put forward feasible proposals for the food subsidy policies.Foreign scholars'study about China's grain subsidies mainly focused on the general form of subsidies and special specifications of food subsidies, but China's grain subsidies are studied less. The development model and the system distortion of China shows that China is unique, such as the dual economic reality, and thus the benchmark model need to integrate into China's special cases, to analyze its agricultural problems and the possible effects of agricultural policies (such as price distortions and urban-rural gap).The current domestic research about agricultural subsidies and food subsidies are primarily focused on the points of qualitative or static analysis. In the model analysis, the domestic research is relative hysteretic. for example, static analysis is more but the dynamic effect analysis is less; general equilibrium analysis is less which leads to the relative neglect of the balancing equipment of elements of capital and labor in each sector. In the empirical analysis, macro data is used more, but the corresponding analysis on the micro-survey data is used less, which makes the research findings are lack of credibility.Based on the above analysis, it is necessary to learn from international experience in policy analysis on subsidies and combine the international dynamic general equilibrium model with China's specific survey data to do more in-depth analysis on the effect of food subsidy policies to make up for shortcomings of the existing literatures.The effects of China's grain subsidies are analyzed through the establishment of dynamic model, the micro data investigations and quantitative analysis. Given the current policy the current food subsidies are divided into two categories respectively, namely food subsidies for investment and food subsidies for income. The effects of production and welfare of the two type subsidies are probed from single-sector and multi-sectoral cases respectively. The results showed that: Although the current food subsidy policy can increase farmers'production enthusiasm, the effect of production is not significant due to price factors, the lower income of the agricultural sector compared with the industrial sector, and the ratio of subsidies used for production by farmers; However, if the government policies aim at improving the psychological satisfaction and welfare level of households, then the current policy of food subsidies have played an active role from a certain degree.Although the sample size of this dissertation appears inadequate, it still can explain that the current output effect of food subsidy policy is not obvious and give some policy recommendations for the current agricultural subsidy policies. According to the results of the analysis, this dissertation argues that if the government subsidies aim at improving the welfare of farmers and enhancing farmers'confidence, then the current policies have basically reached the requirements; if the government's subsidy policies aim at increasing the enthusiasm of farmers to increase grain production, then the current investment subsidy policies are still needed to be improved from the way and the amount of subsidies, as well as the consideration of region differences to implement subsidy policies appropriated to their local conditions.