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

14 Pages Posted: 1 Apr 2020

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

Multiple version iconThere are 2 versions of this paper

Date Written: August 2002

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.

Keywords: household models, land rights, Chinese agriculture, separability, O120, O130, P320, Q120, Q150

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 (August 2002). American Journal of Agricultural Economics, Vol. 84, Issue 3, pp. 702-715, 2002, Available at SSRN: https://ssrn.com/abstract=3565384 or http://dx.doi.org/10.1111/1467-8276.00329

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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