The Research About The Effect Of Public Investment On Agricultural Productivity And Non-Agricultural Employment

The proportion of rural population is more than half in our country, and this has to be considered in the development of national economy. The problems about agricultural growth, rural development and peasant's income have always been the point of China's economic development, which will decide the trend of national economy. China's economy has been maintaining rapid growth after reform and opening-up. At the same time, agriculture and rural area have also got great achievements. However, in contrast with national economy, the development of agriculture and rural area is slow, which could be observed by the slow growth of peasants' income. The income gap between urban and rural residents has been tending to increase, which is agreed by researchers and related governments. And the reasons are various. From the point view of agricultural production, the main reason is the lack of factor input, especially public investment. Therefore studying how to increase public investment toward rural area and making a list of key investment field is an urgent problem. In addition, in the process of economic development, rural labor force's transferring from agricultural section toward non-agricultural section is a kind of inevitable trend. And this kind of transferring has great effect on less-development regions and the poor, which could accumulate material capital, capital and technology. Since the preliminary of 1980s, China's surplus rural labor has transferred to non-agricultural section in large scale. In rural area, the proportion of income from non-agricultural activity has been kept growing. So, non-agricultural employment has been an important way to the increasing of peasants' income. The core of the problems about agricultural growth, rural development and peasant's income is peasant's income. In such conditions, the basic solution of increasing income is to adjust the structure of rural labor employment, which needs to continue to transfer rural labor. The development of non-agricultural industry is the basis of the structure adjustment of rural industry and rural labor employment. Only in this way non-agricultural employment opportunity could be generated and the proportion and quantity of labor in agriculture reduced. Many studies have discussed China's public investment, agricultural productivity and non-agricultural employment of rural labor from theoretical and empirical research. And some related policy suggestions have been proposed. However, there is almost no study which takes into account the effect of public investment on agricultural productivity and non-agricultural employment of rural labor, especially the latter. The main purpose of this thesis is to establish a united analytical frame on which we could investigate the direction and degree of the effect on agricultural productivity and non-agricultural employment of rural labor. So the difference of various kind of public investment could be explored. On the above analysis, we could quantify the internal relation of agricultural and non-agricultural section and discuss the development level of rural area. Then, some related policy suggestions could be put forward to promote the rapid and harmony development of China's rural development. The main contents and basic conclusions are as follows:Firstly, public investment has important positive effect to the social and economic development of rural area in our country. But there are two kind of problems of total amount shortage and unreasonable structure about public investment in China's rural area. This should be drawn high attention of China's government. Theoretical and empirical researches have shown that public invesetment could promote economic growth of a country or region, as well as in rural area. Considering China as a developing country, the development of rural area will decide the sustanability of national economy to some degree. This thesis has analyzed the present condition of public investment in rural area and its role to rural economy from 1980 to 2003. Empirical results have shown that public investment is an important motive which pushes the economic development of China's rural area, and it is consistent with related studies. Therefore, further enlargement of public investment and adjustment of investment structure in rural area will be very necessary to the sustainable development of rural area.Secondly, the average growth rate of China's agricultural productivity is about 3.9% from 1980 to 2003, but there is some difference among different areas. There is no a convergence, but there are absoluteβconvergence and conditional convergence in China's agricultural productivity. The keeping increase of productivity is basic motive of sustainable growth of agriculture. Through a nonparametric Malmquist index approach, this thesis has analyzed productivity growth of China's agriculture with cost-benefit panel data of 28 provinces in mainland, which is decomposed into technical efficiency and technical progress. The result has shown that the average growth rate of China's agricultural productivity from 1981 to 2003 is 3.9%, which is mainly due to the improvement of technical progress. In the meantime, the growth of China's agricultural productivity is a little different in various regions. In order to investigate the trend of the change of the difference, we have furtherly tested the convergence of China's agricultural productivity. According to the results based on neoclassical model, there is no a convergence of China's agricultural productivity, but there are absoluteβconvergence and conditional convergence, whose speeds of convergence are 3.2% and 5.2% per year. However the results based on the method of unit root test of panel data have shown that there is obvious conditionalβconvergence of provincial productivity in China's agricultural after controlling for time-specific and province-specific factors and serial correlation. To test the reliability of the above results, we also make some further tests using some new panel data method of unit root test. And we get the same results. So we could conclude that these results are robust.Thirdly, non- agricultural employment of rural labor has an obvious characteristic of China's rural economic development, which is becoming more and more important to peasants' income. The rate of employment population in agriculture and non-agriculture has a descending trend. This means that the opportunities on non-agricultural employment of rural labor are increasing, and it is jumping together between different region. Statistic analysis results have shown that the rate of employment population in agriculture and non-agriculture has always been desceding from 1980 to 2003, as well as in the East, the Middle and the West of China. And bias among the East, the Middle, the West and national level of employment strucutre of rural labor is also desceding. The above analysis results mean that agricultural productivity has obviously improved with the deepening of rural economic reform. So rural laor could be released from agriculture production and have more and more opportunities to be engaged in non-agricultural activities. Especially, the development of township village enterprises has very important function to non-agricultural employment of rural labor and will continute exertive important role, we have furtherly tested the convergence of the change trend of non-agricultural employment of China's rural labor with the method of unit root test of panel data. The results have shown that there is conditionalβconvergence of non-agricultural employment of China's rural labor after controlling for time-specific and province-specific factors and serial correlation.Fourthly, there is casualty relationship between agricultural productivity and non-agricultural employment in China, which means that agricultural productivity and non-agricultural employment will improve each other. Public investment has positive effect on agricultural productivity and non-agricultural employment, while the effect of various public investment is different. Theoretical and empirical results have shown that public investment is very important to the development of rural area. The casualty relationship between agricultural productivity and non-agricultural employment is tested through dynamic generalized method of moments (GMM) approach. And a simultaneous equation is established to analyze the effect of public investment on agricultural productivity and non-agricultural employment. The results show that the improvement of non-agricultural employment of rural labor, investment of irrigation, electric power, education, agricultural research & development and road have an obvious effect on the growth of agricultural productivity, but the effect of various public investment is different. The growth of agricultural productivity, investment of irrigation, electric power, education, agricultural research & development and road also have an obvious effect on the improvement of non-agricultural employment of rural labor, but the effect of various public investment is different.Finally, the development level of rural area is kept increasing, and after controlling for time-specific and province-specific factors and serial correlation, there is conditionalβconvergence of regional disparity of provincial rural development and internal disparity among the East, the Middle and the West. In this thesis, we have expanded the new classical economic growth model. Then an indicator of rural development based on agricultural productivity index and labor employment structure of rural area was established to evaluate the level and change of rural development. Because of the improvement of agricultural productivity and the desceding of the rate of employment population in agriculture and non-agriculture, the Indicators of Rural Development in the East, the Middle, the West and national level are growthing. The Indicator of Rural Development in the East is obviously higher than the Middle and the West, while the Indicator of Rural Development in the Middle is only a little higher than the West. And the gap of rural development among the East and the Middle and the West tends to be enlarging. In order to survey the change trend of regional disparity of China's rural development, we have tested the convergence through some unit root test methods of panel data. The results show that after controlling for time-specific and province-specific factors and serial correlation, there is conditionalβconvergence of regional disparity of provincial rural development and internal disparity among the East, the Middle and the West. According to the above analysis, we should put forward on both the growth agricultural productivity and the change of employment structure of rural labor to improve the development level of rural area andnarrow the gap of different areas.