Economic development and the evolution of backyard livestock production: A case study of hog production in China

One widely observed fact associated with rural household livestock production in many developing countries is an inverted-U shape relationship between household livestock production and the level of economic development or farm household income. Poor farmers typically raise few livestock. As their income grows, poor rural households gradually expand their livestock holdings. However, after household income reaches a certain level, livestock production in most households falls. This dissertation attempts to uncover fundamental economic factors that help to generate this inverted-U relationship. This dissertation contains three papers.; In the first paper, using data sets from different countries, I first establish the fact that the inverted-U relationship between income and livestock is a common feature of farm household livestock production in developing countries. I then argue that underlying economic factors can be categorized into three groups: the development of markets, risk, and other economic factors that affect the opportunities costs of family resources. Based on the results using one comprehensive farm household survey conducted in China, I show that these three groups of factors can explain the evolving pattern of backyard hog production observed in several key hog producing provinces in China between 1986 and 1996.; In the second paper, I construct a CGE farm household model that directly incorporates labor and grain market development, where transactions costs are used to represent different levels of market development. By modeling the farm household economy as a mixed complementarity problem, I am able to show that labor and grain market development, in conjunction with changes in other factors, can generate the inverted-U observed in China.; In the third paper, I conduct econometric analysis to test various hypotheses proposed in the second paper. Using the farm household survey data from China, the regression results indicate that at the early stages of economic development, improvements in grain markets and increases in grain productivity are two factors that are mainly responsible for expansion in hog production for poor farm households. However, for relatively richer farm households at later stages of economic development, further developments in grain and labor markets, rising off-farm wage rates, falling household size, and risk considerations all cause household hog production to fall.