A Study On The Public Investment On China's Rural Infrastructure And Agricultural Growth

Agriculture is the foundation of the national economy. China is a large agricultural country; "San Nong" issues have been affecting the healthy development of economy. In recent years, the government of China wants to resolve "San Nong" issues through "building a new socialist countryside". However, where to start to solve the "San Nong" issues? We attempt to study rural infrastructure's impact on agricultural growth from the perspective of rural infrastructure public investment which is basic condition of affecting "San Nong" issues. Clearly, this study has important theoretical and practical significance.From the present situation of research in related fields, many theories about inspection of the links between infrastructure and economic growth found the importance of public infrastructure in economic development. The earlier studies on rural infrastructure and agricultural growth mainly focused on the inspection of the developed countries, as deepening of research, the corresponding studies on developing countries had also made substantial progress. Especially in recent years, with the development of "buliding a new socialist countryside", there are lots of related researchs on rural infrastructure in China. However, most of studies on rural infrastructure in China only focused on rural infrastructure's impacts on agricultural GDP, but lacking further research, for example, lacking its impacts on agrcicultural technical efficiency. In addition, there are many studies using time series data, but comparely lacking studies using panel data. Therefore, they're not fully convincing. In this dissertation, we conducted a further exploration on the relatively neglected perspective and studied rural infrastucture public investment's impacts on agricultural growth in China, trying to be innovative.On the basis of organizing the existing achievements on the development of rural infrastructure, we defined and furtherly elaborated the connotation and extension of rural infrastructure public investment, and studied the relation between rural infrastructure public investment and agricultural growth from the qualitative and quantitative point of view, trying to put forward some new suggestions for system reform of investment on rural infrastructure. From a qualitative point of view, we think, market failure and state interbention in economic theory, public goods theory, Hirschmann's "maximing induced decision-making" theory, Schultz's "agricultural economic growth" theory and Chang Pei-kang's "agriculture and industrialization" theory provide solid theoretical foundation on government's investment on rural infrastructure. The public goods characteristics of rural infrastructure, the features that agriculture is weak industry and agricultural products are lack of demand elasticity determine the necessities of public investment on rural infrastructure.Quantitative analysises are the focus of this dissertation. From the quantitative point of view, first, we regarded agricultural R&D as an example and studied the dynamic relations between rural infrastructure public investment and agricultural growth in China. We found that there exist positive correlations between the two and only exist one-way Granger causality from agricultural R&D to agricultural growth. Secondly, China is divided into eight regions based on administrative divisions, as well as the geographical position of agricultural agro-ecological characteristics. We used the panel data of 1994-2006 to inspect rural infrastructure public investment's impacts on agricultural technical efficiency in China. The results showed that all these public investments significantly improved agricultural technical efficiency. Thirdly, combining the provincial panel data of 1994-2006, we used a double-log model with Cobb-Douglas form to deeply analyze some rural infrastructure-irrigation, rural electrification, agricultural R&D and rural education-public investment's impactss on agricultural growth. The results showed that the relations between land, labor inputs and agricultural growth are adverse, the reason for that is rural institutional change, technological progress and the increase of public investment made up for the decline of traditional inputs. In addition, we also found that the output elasticity of agricultural machinery is biggest and rural infrastructure public investment's impact on agricultural growth is positive. Fourthly, because of the limitation of current government funding, so we combined the results of above, furtherly discussed the problem of priority sequence on rural infrastructure public investment. We found that agricultural R&D, rural electricity and rural education public investment's positive impacts on agricultural growth are the most significant, so it is suggested that more governmental funding should be invested on above three parts. Fifthly, we also analyzed rural infrastructure public investment's contribution to regional inequality between different rural areas; the results showed that the uneven distribution of rural infrastructure public investment is a major factor of widening regional inequality between rural areas in China.On the basis of foregoing analysis and our real problems of rural infrastructure public investments in rural China, we also summarized the successful experience about rural infrastructure public investment in a number of major developed and developing countries: the major investment subject should be government; encouraging NGO and farmers who have certain economic ability to actively participate the construction of rural infrastructure; rural infrastructure is designed to serve agricultural production and farmers, so to encourage farmers to participate in the construction of rural infrastructure and to establish farmers the dominant position of decision-making, which is an important guarantee to enhance the efficiency of public investment; the focus of rural infrastructure investment should be diversified in different stages of development.Investment on rural infrastructure is important prerequisite for agriculture and rural development. As for current rural China, some questions requires prompt solution, for example, "how much to invest", "who will invest in", "invest in what areas", "how to determine the order", and so on. This article will answer these questions through relevant research. The basic concepts in this study and conclusions through theoretical and empirical research are consistent. First, public investment on rural infrastructure in China should take into account two major principles—give consideration to both efficiency and fairness; take farmer's demand as the guidance. Secondly, improving the decision-making process of rural infrastructure investment and implementing the "bottom-up" investment decision-making mechanism. Thirdly, the investment priority should be based on agricultural resource endowment and public investment level to maximize agricultural technical efficiency and promote agricultural growth. Fourthly, we should create conditions for investment subject diversification. Fifthly, the supervision and management of public investment should be strengthened.