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Agriculture, development and structural change in reform-era China

Marden, Samuel (2015) Agriculture, development and structural change in reform-era China. PhD thesis, London School of Economics and Political Science.

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Market based reforms to China’s agricultural sector, between 1978 and 1984, marked the start of the reform era. The reforms were enormously successful, resulting in dramatic increases in both agricultural productivity and output. The first two chapters of this thesis are an empirical exploration of the consequences of the agricultural reforms for the growth of China’s non-agricultural sector and the pattern of Chinese urbanisation. The third chapter uses the interaction between differential rural income growth and the One Child Policy, to shed light on how declining family size has fuelled the latent demand for sex selective abortion in China and beyond. The first chapter explores the link between agricultural productivity and industrialisation in the context of reform era China. A classic literature argues that, at low levels of development, improvements in agricultural productivity can provide an important stimulus to the nonagricultural sector, however empirical evidence of this is limited. Using a natural experiment provided by China’s agricultural reforms, I show that higher agricultural productivity growth had a substantial positive causal effect on non-agricultural output. I use the predictions of a simple two sector model, which nests the possibility of linkages through demand externalities, the supply of capital, and the supply of labour, to provide additional results indicating that the linkages I observe appear to be driven primarily by increases in the supply of capital. In the second chapter, I ask how higher agricultural productivity affected China’s urbanisation. In 1978, at the time of the reforms, more than 80% of China’s population lived in the countryside. By 2011, fewer than 50% did. Whether agricultural productivity increases the pace of urbanisation is theoretically ambiguous, and depends on whether the effect of higher rural incomes is more than offset by the increased demand for urban goods. I show that increased agricultural productivity not only increased the pace of urbanisation between 1978 and 1995, it also affected the type of cities that formed. Higher agricultural productivity increased the output of the urban service sector, at the expense of the tradable industrial sector. The results are consistent with a simple model where urbanisation and structural transformation are jointly determined. In the third chapter, I use China as a setting to explore the hypothesis that the increase in male-female sex ratios observed in China, and many other parts of the world, over the past fifty years is, at least in part, driven by the demographic transition to smaller family sizes. Since 1979, the One Child Policy has imposed economic, and sometimes non-economic sanctions, for breaching proscribed fertility levels. The economic sanctions have meant that, within a class of households, the 1CP may have constrained the fertility of poor households more than rich ones. Using plausibly exogenous variation in household income, I show that richer, less constrained households, had higher fertility in the wake of the implementation of the One Child Policy. I then show that this increase in fertility is associated with a subsequent decline in sex selection. The decline in sex selection is roughly contemporaneous with the emergence of pre-natal ultrasound which dramatically reduced the costs of sex selective abortion. Together, the results suggest that China’s dramatic decline in fertility in the 1970’s, may have played an important role in fuelling the demand for sex selection from the mid 1980’s onwards.

Item Type: Thesis (PhD)
Additional Information: © 2015 Samuel Marden
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
Sets: Departments > Economics
Supervisor: Burgess, Robin

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