Supply response and risk in Chinese agriculture

The main objective of this article is to model the production and supply re sponse in Chinese agriculture, which includes not only the standard argumen ts like expected prices but also risk. We extend Lin's work [1991, 1992] by modelling supply response as a three-equation model. We fit our model to d ata for 28 Chinese provinces from 1970 to 1997 to determine whether nationa l Chinese agricultural supply is price and price-risk responsive. Further, we fit our model to data for North, North-east, South and South-east region s. Results from the three systems equations are compared to single equation estimations. At the national level, Chinese agriculture is found to be pri ce and price-risk responsive. The regional analyses suggest that significan t regional differences exist. Unlike Lin, we do not find the household resp onsibility system (HRS) to be the dominant factor in increased yields in di fferent regions of China.