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Household responsibility system and China's agricultural Growth revisited: Addressing endogenous institutional change
Author(s) -
Sun Shengmin,
Chen Qiang
Publication year - 2020
Publication title -
economics of transition and institutional change
Language(s) - English
Resource type - Journals
eISSN - 2577-6983
pISSN - 2577-6975
DOI - 10.1111/ecot.12248
Subject(s) - endogeneity , presumption , panel data , china , economics , agriculture , estimation , instrumental variable , exploit , demographic economics , econometrics , geography , political science , computer security , management , archaeology , computer science , law
The rise of the Household Responsibility System has been widely viewed as a significant contribution to China's agricultural growth. However, this empirical conclusion is rested upon a convenient but doubtful presumption that the process of institutional change, also known as decollectivization, is exogenous. We contribute to this literature by explicitly recognizing the endogeneity of institutional changes, and exploit exogenous variations in lagged weather shocks and initial fixed assets for consistent estimation. With improved data on irrigation, mechanization, weather and institutional changes in a provincial panel data during 1970–1987, the results of panel instrumental estimations reveal that the Household Responsibility System had a significantly positive effect on China's agricultural growth, which was larger than indicated by OLS estimates that suffer from adverse selection and attenuation biases.