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Does household engagement in concurrent business affect the farm size-technical efficiency relationship in grain production? Evidence from Northern China

Min Zhong (College of Economics and Management, Northwest A&F University, Yangling, China) (College of Statistics, Xi’an University of Finance and Economics, Xi’an, China)
Yuchun Zhu (College of Economics and Management, Northwest A&F University, Yangling, China)
Qihui Chen (Center for Food and Health Economic Research, China Agricultural University, Beijing, China)
Tianjun Liu (College of Economics and Management, Northwest A&F University, Yangling, China)
Qihua Cai (School of Business, Zhengzhou University, Zhengzhou, China)

China Agricultural Economic Review

ISSN: 1756-137X

Article publication date: 27 July 2018

Issue publication date: 15 January 2019

490

Abstract

Purpose

The purpose of this paper is to examine how households’ engagement in concurrent business (CB), which is measured by the contribution of off-farm income to household income, affects the farm size–technical efficiency (TE) relationship in Northern China.

Design/methodology/approach

This paper applies a stochastic frontier analysis method to analyze data on 1,006 rural households collected from four major wheat-producing provinces in Northern China, adopting a translog specification for the underlying production function.

Findings

The analysis yields three findings. First, the farm size–TE relationship is inverted U-shaped for all CB engagement levels higher than 5 percent, and the most technically efficient farm size increases with the level of household CB engagement. Second, how TE varies with the level of CB engagement depends on farm size: an inverted-U relationship for relatively small farms (<10μ), a positive relationship for middle-size farms (10–20μ), and a negative relationship for large farms (>20μ). Finally, the overall TE score, 0.88, suggests that wheat output can be increased by 12 percent in Northern China if technical inefficiency were eliminated.

Originality/value

Unlike most previous studies that examine the impacts of farm size and households’ off-farm business involvement separately, this paper examines how these two factors interact with each other.

Keywords

Acknowledgements

This research is financially supported by the following programs: National Natural Science Foundation of China (Grant No. 71773092), National Natural Science Foundation of China (Grant No. 71603259), Program for Humanity and Social Science Research by Ministry of Education of China (17YJA790102), Program for Shaanxi Soft Science in 2017 (2017KRM148), Research Fund for Research on Food Marketing Policy and Food Consumption Behavior (No. 2016RW003), and the Chinese Universities Scientific Fund (2017RW005). The authors would like to thank all members of the research team for conducting the survey and collecting the data used in the analysis.

Citation

Zhong, M., Zhu, Y., Chen, Q., Liu, T. and Cai, Q. (2019), "Does household engagement in concurrent business affect the farm size-technical efficiency relationship in grain production? Evidence from Northern China", China Agricultural Economic Review, Vol. 11 No. 1, pp. 125-142. https://doi.org/10.1108/CAER-11-2016-0179

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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