Trade development and agricultural productivity change: Evidence from China

Abstract

Since China joined the World Trade Organisation (WTO) in 2001, more Chinese agricultural products have been exported to various countries at low tariff rates. However, the impacts of WTO accession on China's agricultural productivity and technical efficiency are ambiguous. The aim of this study is to investigate the impacts of trade on China's agricultural production by analysing productivity changes before and after 2001. To understand the role trade plays in productivity and technical efficiency change, we introduce two trade indices to the multi-input multi-output distance function and technical inefficiency model to examine the export and import effects on technical efficiency and total factor productivity (TFP) change. Our findings indicate that the average growth rate of TFP is 5.8% per annum before joining the WTO, and it increases slightly with an annual rate of 8.5% after joining the WTO. Additionally, with the development of trade liberalisation, the traditional advantages (e.g., technology innovation, spillovers, FDI) of exports on agricultural productivity are being replaced by the competitive effect of imports.