ABSTRACT
This chapter aims to investigate systematically the linkages between grain prices and farm households’ supply response behaviour in China during the period 1978-92. The most important feature of the work is its theoretical and empirical analysis, linking the effects of own-consumption, grain prices, farm income and other non-farm income on marketable surplus supply. The empirical results are consistent with the predictions of the theoretical model and demonstrate the complexity of these relationships within farm households at this stage in the development of Chinese rural economy. Agriculture in China remains relatively traditional and is characterised by small scale units, labour intensive methods and high levels of subsistence production. The growing complexity of the rural economy had implications for the way in which farm households’ grain supply behaviour should be modelled. Household full income maximisation was regarded as a more appropriate behavioural assumption for the modelling exercise than farm profit maximisation.
