Local Versus Global Separability in Agricultural Household Models: The Factor Price Equalization Effect of Land Transfer Rights

Posted: 23 Dec 2002

See all articles by Michael R. Carter

Michael R. Carter

University of Wisconsin - Madison - Department of Agricultural & Applied Economics

Yang Yao

Peking University - China Center for Economic Research (CCER); Peking University - CCER

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Abstract

Commonly employed global tests for separability between production and consumption decisions are theoretically inappropriate when the market failures creating non-separabilities differentially constrain some, but not all households. Simulated maximum likelihood estimates using Chinese panel data reject the restrictions implied by a global separability test in favor of regime-specific or local separability tests. The estimates also show that a global approach to separability obscures the significant effect that less-encumbered land transfer rights would have on shadow factor price equalization across households and allocative efficiency. The findings on transfer rights suggest a resolution to the debate in China on further property rights reform.

Suggested Citation

Carter, Michael R. and Yao, Yang and Yao, Yang, Local Versus Global Separability in Agricultural Household Models: The Factor Price Equalization Effect of Land Transfer Rights. Available at SSRN: https://ssrn.com/abstract=320431

Michael R. Carter (Contact Author)

University of Wisconsin - Madison - Department of Agricultural & Applied Economics ( email )

427 Lorch St.
Madison, WI 53706-1503
United States
608-263-2478 (Phone)

Yang Yao

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, 100871
China

Peking University - CCER ( email )

Beijing, 100871
China

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