Are China's regional agricultural productivities converging: How and why?. (July 2019) - Wang, Sun Ling
Highlights: China's agricultural productivity rebounded after a slower TFP growth in the 2005–2007 period. Convergence tests show a TFP "catch-up" effect for provinces with lower TFP levels. There is no evidence of an unconditional TFP convergence across all provinces in China farm sector. Estimated rates of β convergence are conditional on the heterogeneity effects across regions. Higher growth rates of educational attainment and R&D can enhance agricultural TFP growth. Abstract: This article tests the hypotheses of convergence to a single level of total factor productivity (TFP), and a steady state of TFP growth rate in China's agricultural sector. Based on multilateral TFP estimates we found that China's agricultural sector has rebounded in recent years from a slower TFP growth in the 2005–2007 period. While convergence test results confirm a "catch-up" effect that provinces with lower TFP levels tend to grow faster than others, estimated rates of β convergence are conditional on how we capture the heterogeneity effect across regions. The rates of β convergence range from 0.016 to 0.039 under different model specifications. Estimates show that higher growth rates of educational attainment, R&D, and intermediate goods density (per unit of labor) can enhance TFP growth. Unfortunately, there is no evidence of an overall σ convergence, indicating that TFP levels are not converging except in the South region. It implies that to catch up with leading provinces, it would require extra efforts for those lagging behind by increasing their region-specific research investment, promoting rural educational attainment, and enhancing embodied technical change.