China & World Economy  / 37–51, Vol. 24,  No. 3, 2016

How Off-farm Employment Affects Technical Efficiency of China’s Farms:

The Case of Jiangsu

Linxiu Zhang, Weiliang Su, Tor Eriksson, Chengfang Liu*

Abstract

Using three-wave survey data for four villages of Jiangsu Province in China, the present paper examines whether and to what extent off-farm employment affects the technical efficiency of agricultural production. The level of technical efficiency is measured using a stochastic frontier production function approach. Based on estimation results from instrumental variable panel quantile regressions we find that there is a positive significant effect of off-farm employment on the level of farm technical efficiency. We also find that fragmentation of farmland is a barrier to the improvement of technical efficiency. In addition, we find a downward trend in the level of agricultural technical efficiency among our sample. Therefore, the Chinese Government should stimulate agricultural mechanization and the development of farming techniques to improve technical efficiency in the context of increasing off-farm employment. 

Key words: off-farm employment, stochastic frontier analysis, technical efficiency