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The Annals of Regional Science

Erschienen in:

19.05.2022 | Original Paper

Capital market distortion, agricultural producer service and wage inequality in the small-scale agriculture

verfasst von: Dianshuang Wang, Xiaochun Li

Erschienen in: The Annals of Regional Science | Ausgabe 2/2022

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Abstract

Agriculture in developing countries operates on small-scale plots in general, which makes the direct utilization of durable capital equipment difficult. An intermediate sector is needed to facilitate the usage of capital. By accommodating the agricultural producer service sector, this paper builds three-sector general equilibrium models and investigates the impact of mitigation of capital market distortion on wage inequality between skilled and unskilled labor. The paper highlights the agricultural producer service sector and substitution between service and unskilled labor and arrives that mitigation of capital market distortion may widen wage inequality. The main conclusion is different from existing literature and provides new insights into this issue.

Vorheriger Artikel The importance of intangible assets in regional economic growth: a growth accounting approach

Nächster Artikel Does housing policy impact income sorting near urban amenities? Evidence from Vienna, Austria

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Sarah et al. (2016) offered a comprehensive summary on the size of farms worldwide. They showed that farms greater than 5 ha in size cover 27% of the farmland in low-income countries, while 97% in high-income countries. The share of farmland controlled by larger farms is higher in countries with larger average incomes.

The research utilizes a dual economy structure and considers this issue in the context of a developing economy. Though we take China as an example, the analysis of the research has implications for other developing countries. Two reasons support this argument. First, this phenomenon is prominent in China because of rapid economic growth and severe land fragmentation. Second, results shed light on other developing countries. Along with industrialization, many developing countries also face similar issues and develop some kind of agricultural producer service (mainly in machinery services form). For example, Bangladesh (Mottaleb et al. 2017), Myanmar (Belton et al. 2021), Ethiopia (Ayele 2022).

From 2009 to 2019, the average growth rate of migrants’ income was 10.47%, while the price index was only 2.42%. Data for rural migrants’ income comes from the Department of Household Surveys National Bureau of Statistics of China. The growth rate of the price index comes from the National Bureau of Statistics of China 2020.

Here, intermediate inputs refer to purchase inputs, like fertilizers, pesticides, weedicides,etc. The small-scale agriculture could purchase these intermediate inputs directly. Without rural labor migration, the utilization of such intermediate inputs could promote agricultural output. Capital refers to durable capital equipment, e.g. tractors, harvesters, weed cutters, pump sets for irrigation purpose.

Specifically, firms in this sector, as the substitute for individual farmers' investment, provide services to smallholders. Thus, smallholders could use modern technology and inputs without paying the corresponding high sunk costs. Meanwhile, firms provide services to a large number of small plots and greatly lower their unit cost of operation.

Available at http://nynct.jiangsu.gov.cn/art/2019/5/30/art_13274_8358419.html (accessed April 15, 2022). (in Chinese).

To avoid complexity and make the model more tractable, we use explicit functions.

Such methods can be referred to Pi and Chen (2016) and Beladi et al. (2019) and others.

Other results are shown in Appendix B.

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Titel: Capital market distortion, agricultural producer service and wage inequality in the small-scale agriculture
verfasst von: Dianshuang Wang
Xiaochun Li
Publikationsdatum: 19.05.2022
Verlag: Springer Berlin Heidelberg
Erschienen in: The Annals of Regional Science / Ausgabe 2/2022
Print ISSN: 0570-1864
Elektronische ISSN: 1432-0592
DOI: https://doi.org/10.1007/s00168-022-01141-x

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