Communal duality: Agricultural subsidies from TVEs

Abstract

The policy of subsidizing agriculture with profits made by township and village enterprises has played an important role in maintaining stability and accelerating balanced economic growth in the Chinese rural areas. It represents an interesting subject in the literature of development economics for two reasons. First, the policy started at a very early stage of industrialization. Second, the policy has been carried out often voluntarily at the community level rather than at the state level. This paper examines the origin and rationales of such a policy and finds that the policy cannot be understood unless we look into a special institutional arrangement: China's unique communal duality. Study of the subject contributes significantly to an understanding of development economics.