A Study On Land System, Economies Of Scale And The Farmer Poverty

As a developing country, the poverty of rural population in China which hasbecome one of the basic problems impeding the achievement of overall well-off societyand it is difficult to dealing with. The reason is complex and involving various aspects,such as the opportunities of non-agricultural employment, the disparities of resourceendowment in different counties, the land system, the quality of rural poor people andthe gap between urban and rural development. The existing literature almost studied theevery aspects of various reasons leading to farmers’ poor living standard but lacked ofthe problems of land system, and that is exactly the perspective of my dissertation.Since the reform and opening up, the government of China emphasized on theproblem of farmer’s poverty. With the development of economy and the increasingefforts to alleviate poverty year after year, farmer’s income has largely increased and theabsolute number of poor farmers has sharply dropped. Although the achievement isnotable, there are two serious realities we have to face：（1）in spite of the advancementof economy and the increasing investment in supporting the poor, the drop of famersnumber living in poor is evidently slowing down;(2) the phenomenon of farmersreturning to poverty becomes severe while the increasing effort to support the poor.Amartya Sen, a famous expert study on poverty problem, considered that the deepsource of poverty was basic feasible ability, in other words, the viability, had beendeprived of. The lack of viability means sinking into thepoverty trap. According to theeconomic theory and empirical results, the basic solution to enhance farmers’ viabilitydepends on the way to realize the evolution of agriculture labor division level. Therefore,the way to solve the problem of farmers’ poverty, is to enhance the agriculture levellabor division. Then the farmers’viability can be enhanced, and farmers can break awayoff poverty trap.In the current circumstances, the Chinese agricultural production exists theserious diseconomies of scale in land use, in other words, the low ability of sustainableuse of land resources (agricultural predatory management) and agriculturaldiseconomies of scale (farmland fragmentation). Diseconomies of scale in land use canrestrain the use of Large machinery and equipment in agricultural production.Agricultural predatory management also suppress the use of inputs to improve the soilproductivity. Agricultural machinery and equipment, inputs to improve the soilproductivity, belong to industrial products being used in agricultural production, are the two factors to accomplish agricultural roundabout production. The progress, in essence,is the solidifying of division. After the division being led, scale economy will begenerated in agricultural production and labor productivity will be increased. At thisstage, we can not find these two factors were being used in China agriculture. Thenagricultural roundabout production do not exist in agricultural production. Andagriculture sector can not share the advantage of industry progress. Thus Agriculturaldivision is restrained, farmers’ viability becomes low, the poverty of rural population issevere. Although the government has put emphasis on farmer’s poverty, because of thecurrent country institution, especially the land institution, most of farmers’ viabilitywere excessively deprived. So agricultural division is restrained, scale management cannot accomplish in agriculture, farmers’ viability become low, the poverty of ruralpopulation is severe and institutional. Institutional poverty is the main reason offarmers’ falling into poverty trap, and it is the essential reason of hardness to eliminatefarmers’absolute poverty and increase of relative poverty.It is meaningful both in theory and practice to work out the relationship betweenthe system and farmers’ viability. Through methods of institutional analysis, marginalanalysis and measurement analysis, this paper, based on the deep thought of farmer’sfeeble viability and agricultural diseconomies of scale, starts with division of labor andthen analyses Chinese institution in theory, especially the action mechanism of landsystem preventing agricultural labor division from evolving, which makes our country’sfamers be caught up in a “poverty trap”. The author thinks that only throughinstitutional innovation promoting agricultural labor division, can farmers’ viability beenhanced and the problem of famers’poverty be dealt with better.In the long-term of economic growth, institution makes a great impact on labordivision through influencing economic man’s decision behavior, so it is very essential toestablish an analytical framework to analyze the relationship among institution, famers’decision behavior and agriculture’s labor division. This paper has done a preliminarytheoretical groundwork in this regard and through the perspective of labor division’sevolution, explained system principle of labor division’s evolution in agriculture:institutional arrangement influences farmers’ long-term investment behavior, the willingof land transfer and labors’ decision on mobility, thus determining agriculture’s level oflabor division, which determines sustainable use of land and scale economy of land andwhether agriculture exists economy of scale. Moreover, agricultural division alsodecides farmers’ viability, thus deciding their income. Therefore, the study of farmers’ behavior and agricultural division evolution can not only open the black box ofagricultural division evolution, but also reveal the root of farmers’ poverty-institutioncontributes to feeble viability and thus find out the effective institution and institutionalchange direction. Apart from setting up theoretical framework, this paper takes fourpoor counties in northwest of Shanxi province in China as example and makes adiscussion about the effect of institution on these areas’poverty, in support of the theory.My dissertation has eight chapters and divided into four parts. The first partincluding chapter1-3and mainly combined with China’s “three rural” background, landsystem background, agricultural diseconomies of scale (agricultural predatorymanagement, farmland fragmentation), and draws that improving famers’ viability fromthe system level is of great importance. By using the theory of new classical economics,new institutional economics and the new economic growth theory, this part analyses themechanism of land system influencing the evolution of agricultural labor division, thatis, agricultural scale management. Then discusse the influence path that land systemleads farmers to get into the “poverty trap”. The second part including Chapter4-6andmainly analyses the mechanism from theoretical and empirical views that Chinese landsystem inhibits the evolution of agricultural division and then hinders rural scaleeconomy, thus resulting in farmers’ poverty. Meanwhile, with the field investigation infour poor counties in China’s Shanxi province, this part explores the relationshipbetween the farmer’s poverty in these four counties and land system by using methodsof statistics and econometrics, in order to support the above theoretical analysis. Thethird part is the seventh chapter and also the foothold of the whole paper. This partpoints out the change direction of our country’s land system that we should increasepeasants’ income and reduce poverty by decreasing transaction cost, promotingspecialization and division of labor, promoting agricultural scale operation. The last partis the eighth chapter and mainly analysis the deficiency of this dissertation and futureresearch directions.The main points of this dissertation include: Economic growth is a process of theevolution of division. Returns to scale conditions that one industry can achieve decideits position in the social exchange. During this process, institution influences the speedof division evolution through affecting economic man’s decision behavior, which is ofgreat significance for the emergence and development of the division of labor. Thepoverty of Chinese farmers is attributed to the low viability caused by unfairdistribution of power, which is a kind of institutional poverty. In essence, our existing institution, land system in particular, hinders the division of labor of agriculture fromevolving and it manifests as the present stage of agricultural diseconomies scale, namely,agricultural predatory management and land fragmentation. Therefore, it is sufficient topromote the evolution of agricultural labor division and solve famers’ poverty throughinstitutional innovation and change, giving famers full land property rights.The innovations of this dissertation are listed below:(1) Starting with labordivision, it links labor division and farmers’ survival ability, that is, farmers’ povertyand analyses the economic reason of farmers’ low viability and being stuck in a“poverty trap”-the low level of labor division. In addition, it further discusses the sourceleading to the low labor division level-institution and indicates the action mechanismthat institution affects labor division, farmers’ viability and their poverty.(2) In thisdissertation, agricultural scale economy is involved with land scale economy and landsustainable use. And it studies institutional factors influencing the ability of landsustainable use from the perspective of no separation of land ownership andmanagement. It illustrates institutional factors influencing the form and progress of themarket for the transfer of land contract rights from separation of land ownership andmanagement aspect. Besides, this paper elaborates agricultural diseconomies of scale atpresent-the relationship among land fragmentation (land diseconomies of scale), overexploitation of land (poor ability of sustainable land utilization), the level of agriculturallabor division and famers’low viability.(3)This dissertation studies farmers’behavior infour poor counties in the northwest of Shanxi province and the result shows that underour country’s framework of existing institution, famers’over predatory management andland fragmentation in these areas is very serious. And further empirical test alsosuggests that institution influences the farmers’ behavior in these four counties, whichwill exert vital effects on famers’ viability and poverty. So it is important for bothShanxi to deal with farmers’ poverty and the central government as well as otherprovinces to make poverty alleviation policy.