| Since 1978, China has embarked a series of economic reform policies and programs. The most notable ones are those which decollectivize the communes and replace the collective system with an individual household farming approach called the Household Responsibility System (HRS). The implications of such an institutional shift are tremendous. Inside China, there is a view that the commune system has not been that successful as numerous scholars outside China have thought. A review of the literature reveals when the co-operative income is distributed on a per-labor-input basis and when the behavior of labor emulation exists, the work incentives of a member in that co-operative will reach the optimum value. Also, effective labor monitoring is required to guarantee an adequate supply of labor effort in the production process. The hypothesis to be tested here is: the HRS induces higher work incentives, thus, it has resulted in higher agricultural productivity, particularly that of labor, than does the original collective farming approach.; We have assumed a Cobb-Douglas production function to represent the Chinese agricultural production relationship, based upon which, regression equations are derived and estimated. The novelty of our regression analyses is that the effect of the shift from collectives to the household farming is explicitly estimated, based upon sets of cross-sectional data. The results of the regression analyses support what the hypothesis has stipulated.; In three or four years after the adoption of the new system, the agricultural production had increased and the rural income had become significantly higher. However, problems concerning further growth also surfaced. The question of the sustainability of the agricultural growth is examined. In conclusion, we also comment on two aspects: first, the conflict of administrative controls and market operations; and, second, the contradictory policies adopted by the government. |
