Skip to main content
Top
Published in:

19-05-2022 | Original Paper

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

Authors: Dianshuang Wang, Xiaochun Li

Published in: The Annals of Regional Science | Issue 2/2022

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

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.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 390 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Maschinenbau + Werkstoffe




 

Jetzt Wissensvorsprung sichern!

Appendix
Available only for authorised users
Footnotes
1
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.
 
2
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).
 
3
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.
 
4
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.
 
5
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.
 
7
To avoid complexity and make the model more tractable, we use explicit functions.
 
8
Such methods can be referred to Pi and Chen (2016) and Beladi et al. (2019) and others.
 
9
Other results are shown in Appendix B.
 
Literature
go back to reference Ayele S (2022) The resurgence of agricultural mechanisation in Ethiopia: rhetoric or real commitment? J Peasant Stud 49(1):137–157CrossRef Ayele S (2022) The resurgence of agricultural mechanisation in Ethiopia: rhetoric or real commitment? J Peasant Stud 49(1):137–157CrossRef
go back to reference Beladi H, Chaudhuri S, Yabuuchi S (2008) Can international factor mobility reduce wage rate inequality in a dual economy? Rev Int Econ 16(5):893–903 Beladi H, Chaudhuri S, Yabuuchi S (2008) Can international factor mobility reduce wage rate inequality in a dual economy? Rev Int Econ 16(5):893–903
go back to reference Beladi H, Chao CC, Ee MS (2019) Capital market distortion, firm entry and wage inequality. China Econ Rev 56:101312CrossRef Beladi H, Chao CC, Ee MS (2019) Capital market distortion, firm entry and wage inequality. China Econ Rev 56:101312CrossRef
go back to reference Belton B, Win MT, Zhang X, Filipski M (2021) The rapid rise of agricultural mechanization in Myanmar. Food Policy 101:102095CrossRef Belton B, Win MT, Zhang X, Filipski M (2021) The rapid rise of agricultural mechanization in Myanmar. Food Policy 101:102095CrossRef
go back to reference Chao CC, Nabin M, Nguyen X, Sgro PM (2016) Wage inequality and welfare in developing countries: privatization and reforms in the short and long run. Int Rev Econ Financ 42:474–483CrossRef Chao CC, Nabin M, Nguyen X, Sgro PM (2016) Wage inequality and welfare in developing countries: privatization and reforms in the short and long run. Int Rev Econ Financ 42:474–483CrossRef
go back to reference Chaudhuri S, Gupta MR (2014) International factor mobility, informal interest rate and capital market imperfection: a general equilibrium analysis. Econ Model 37:184–192CrossRef Chaudhuri S, Gupta MR (2014) International factor mobility, informal interest rate and capital market imperfection: a general equilibrium analysis. Econ Model 37:184–192CrossRef
go back to reference Dong Z, Li X (2019) Rural dual economics, subsidy policy and the income inequality between skilled and unskilled workers. Asia-Pac J Account Econ 26(5):609–621 Dong Z, Li X (2019) Rural dual economics, subsidy policy and the income inequality between skilled and unskilled workers. Asia-Pac J Account Econ 26(5):609–621
go back to reference Harris JR, Todaro MP (1970) Migration, unemployment and development: a two-sector analysis. Am Econ Rev 60:126–142 Harris JR, Todaro MP (1970) Migration, unemployment and development: a two-sector analysis. Am Econ Rev 60:126–142
go back to reference Huang Z, Yu N (2010) New agricultural business entities: current situation, constraints and development ideas– an analysis of zhejiang province as an example. Chin Rural Econ 10:16–26 (In Chinese) Huang Z, Yu N (2010) New agricultural business entities: current situation, constraints and development ideas– an analysis of zhejiang province as an example. Chin Rural Econ 10:16–26 (In Chinese)
go back to reference Li X, Zhou Y (2013) An economic analysis of remittance of unskilled migration on skilled-unskilled wage inequality in labor host region. Econ Modell 33:428–432CrossRef Li X, Zhou Y (2013) An economic analysis of remittance of unskilled migration on skilled-unskilled wage inequality in labor host region. Econ Modell 33:428–432CrossRef
go back to reference Lin C, He L (2020) Targeted monetary policy and agriculture business loans. N Am J Econ Financ 54:101290CrossRef Lin C, He L (2020) Targeted monetary policy and agriculture business loans. N Am J Econ Financ 54:101290CrossRef
go back to reference Ministry of Agriculture and Rural Affairs of China (2020) Typical Cases of National Agricultural Socialization Services. China Agriculture Press, Beijing (in Chinese) Ministry of Agriculture and Rural Affairs of China (2020) Typical Cases of National Agricultural Socialization Services. China Agriculture Press, Beijing (in Chinese)
go back to reference Mottaleb KA, Rahut DB, Ali A, Gérard B, Erenstein O (2017) Enhancing smallholder access to agricultural machinery services: lessons from Bangladesh. J Develop Stud 53(9):1502–1517CrossRef Mottaleb KA, Rahut DB, Ali A, Gérard B, Erenstein O (2017) Enhancing smallholder access to agricultural machinery services: lessons from Bangladesh. J Develop Stud 53(9):1502–1517CrossRef
go back to reference Pi J, Chen X (2016) The impacts of capital market distortion on wage inequality, urban unemployment, and welfare in developing countries. Int Rev Econ Financ 42:103–115CrossRef Pi J, Chen X (2016) The impacts of capital market distortion on wage inequality, urban unemployment, and welfare in developing countries. Int Rev Econ Financ 42:103–115CrossRef
go back to reference Restuccia D, Rogerson R (2017) The causes and costs of misallocation. J Econ Perspect 31(3):151–174CrossRef Restuccia D, Rogerson R (2017) The causes and costs of misallocation. J Econ Perspect 31(3):151–174CrossRef
go back to reference Sarah L, Jakob S, Terri R (2016) The number, size, and distribution of farms, smallholder farms, and family farms worldwide. World Dev 87:16–29CrossRef Sarah L, Jakob S, Terri R (2016) The number, size, and distribution of farms, smallholder farms, and family farms worldwide. World Dev 87:16–29CrossRef
go back to reference Wang J, Xiao Q, Li J (2018) Financing predicament and countermeasure of new agricultural proprietors. Agri Econ Quest 2:71–77 (In Chinese) Wang J, Xiao Q, Li J (2018) Financing predicament and countermeasure of new agricultural proprietors. Agri Econ Quest 2:71–77 (In Chinese)
go back to reference Wang L, Yang R, Wu B (2020) A study on total factor productivity of agricultural production of rural households in China. Manage World 12:77–90 (In Chinese) Wang L, Yang R, Wu B (2020) A study on total factor productivity of agricultural production of rural households in China. Manage World 12:77–90 (In Chinese)
go back to reference Yu ESH, Chao CC (2021) Appropriation, firm dynamics, and wage inequality. Int J Econ Theory 17(1):118–129CrossRef Yu ESH, Chao CC (2021) Appropriation, firm dynamics, and wage inequality. Int J Econ Theory 17(1):118–129CrossRef
go back to reference Zhang P (2019) Skill formation, environmental pollution, and wage inequality. Ann Reg Sci 62:405–424CrossRef Zhang P (2019) Skill formation, environmental pollution, and wage inequality. Ann Reg Sci 62:405–424CrossRef
go back to reference Zhang X, Yang J, Thomas R (2017) Mechanization outsourcing clusters and division of labor in Chinese agriculture. China Econ Rev 43:184–195CrossRef Zhang X, Yang J, Thomas R (2017) Mechanization outsourcing clusters and division of labor in Chinese agriculture. China Econ Rev 43:184–195CrossRef
Metadata
Title
Capital market distortion, agricultural producer service and wage inequality in the small-scale agriculture
Authors
Dianshuang Wang
Xiaochun Li
Publication date
19-05-2022
Publisher
Springer Berlin Heidelberg
Published in
The Annals of Regional Science / Issue 2/2022
Print ISSN: 0570-1864
Electronic ISSN: 1432-0592
DOI
https://doi.org/10.1007/s00168-022-01141-x