Research Article: Outsourcing Agricultural Production: Evidence from Rice Farmers in Zhejiang Province

Date Published: January 27, 2017

Publisher: Public Library of Science

Author(s): Chen Ji, Hongdong Guo, Songqing Jin, Jin Yang, Wujun Ma.


China has recorded positive growth rates of grain production for the past eleven consecutive years. This is a remarkable accomplishment given that China’s rapid industrialization and urbanization has led to a vast reduction of arable land and agricultural labor to non-agricultural sectors. While there are many factors contributing to this happy outcome, one potential contributing factor that has received increasing attention is the emergence of agricultural production outsourcing, a new rural institution that has emerged in recent years. This study aims to contribute to the limited but growing literature on agricultural production outsourcing in China. Specifically, this study analyzes factors affecting farmers’ decisions to outsource any or some production tasks using data from rice farmers in Zhejiang province. Results from a logistic model show that farm size and government subsidy encourages farmers to outsource while ownership of agricultural machines and land fragmentation have negative effects on farmers’ decisions to outsource production tasks. Results also showed that determinants of outsourcing decisions vary with the production tasks that farmers outsourced.

Partial Text

China has food-provision responsibilities for one-fifth of the world’s population with less than one-tenth of the world’s arable land. Thus, food security has long been at the heart of development policies in China. China’s food security has also been increasingly challenged by rapidly changing economic and environmental landscapes. Specifically, rapid urbanization and industrialization processes, combined with environmental degradation, have caused arable land to shrink at alarming rates [1]. Furthermore, China continues to concurrently experience a steady flow of labor out of rural and into urban environments (i.e., from agricultural to non-agricultural sectors); according to data from the National Bureau of Statistics [2], China’s total number of migrants reached 261 million in 2010 [2].

Zhejiang Province is located on the East Coast of China and was one of the major grain-production bases in the pre-reform era. Since the beginning of China’s rural reforms in 1978, Zhejiang Province has consistently been one of the front-runners in economic development; however, the unprecedented pace and scale of industrialization and urbanization in Zhejiang Province have resulted in substantial reductions of arable land. According to recent statistics, total crop area and production have been reduced by 63.9% and 46.6% (from 1978 and 2012). By the end of 2012, the average crop production area per capita in Zhejiang Province was 0.023 hectare (ha), the crop self-sufficiency ratio was less than 40%, and the gap between crop demand and supply was 1.2 million tons; thus, this province now has the second-largest food deficiency in the nation [3]. Therefore, local and provincial governments are now frequently interested in policies that can potentially help stabilize and promote crop production.

As outsourcing agricultural production is not a common phenomenon in other countries, there is a paucity of literature on agricultural-production outsourcing outside of China. However, there are increasing numbers of studies by Chinese researchers on determinants associated with decisions to outsource agricultural production in China. Existing studies in the literature support the notion that farmers are rational economic agents; thus, their decisions to outsource particular production tasks are affected by factors related to the benefits and costs of the two competing options (i.e., outsourcing or not-outsourcing). Farmers incur service fees when they choose to outsource; however, they, can also save time, reduce operational costs, and spend time on earning income from other activities. If the benefits outweigh the costs of outsourcing, they will choose to outsource; however, if the costs outweigh the benefits, they will choose not to outsource.

A household survey was jointly conducted by the Zhejiang Department of Agriculture’s Crop Bureau, Zhejiang University, and Zhejiang Normal University from December 2012 to January 2013. Ten counties (five in southern Zhejiang and five in northern Zhejiang) from 10 different prefectures were selected as our sample counties. And they are: Xiaoshan (Hangzhou prefecture), Jiashan (Jiaxing prefecture), Nanxun (Huzhou prefecture), Yinzhou (Ningbo prefecture), and Zhuji (Shaoxing prefecture); the five counties in southern Zhejiang include Wenling (Taizhou prefecture), Pingyang (Wenzhou prefecture), Wucheng (Jinhua prefecture), Jiangshan (Quzhou prefecture), and Jinyun (Lishui prefecture). Fig 1 shows the geographical distribution of the 10 sample counties in Zhejiang Province. In each county surveyed, we selected 20 small-scale rice producers and 10 large-scale rice producers randomly. Thus we collected 300 rice producers of the whole sample, and finally 271 survey questionnaires were effective as 29 were dropped due to incomplete information.

Table 5 reports econometrics results on determinants of using outsourcing services (Columns 1–5) and adoption intensity (Column 6) during the survey year. The logit model is estimated for each of the five main production tasks (i.e., plowing, sowing of seeds, transplanting, plant protection, and harvesting) with each column corresponding to one of the production tasks. In all of the regressions, county dummy variables are included; the standard errors of the estimated coefficients are all adjusted for possible clustering effects at the village level. To ease the interpretation of the results, the reported coefficients for each variable (xki) in the logit models are all marginal effects (∂P(yji = 1)/∂xki). The econometrics analysis yields a number of interesting results and many are consistent with our hypotheses. The relative significances of different determinants, however, vary by particular production tasks that are outsourced.

China’s rapid urbanization and industrialization will continue to create increasing pressure on the nation’s food security. The attainment of food security in this extremely challenging situation will be prioritized in future development policies of the Chinese government. Nevertheless, China’s agricultural sector has proven to be quite resilient; its total grain production has increased for the past 11 consecutive years. While many factors have contributed to this, agricultural-production outsourcing (a relatively new institution) is believed to have been significant in recent years; however, the associated determinants and consequences of agricultural-production outsourcing remain poorly understood. This is one of the very few papers exploring this important and emerging issue. Our econometrics results show that farm scale, labor endowment, government subsidies, and the ownership of agricultural machinery are key determinants in the decisions of rice farmers to outsource production tasks.




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