THE DETERMINANTS OF FARM INVESTMENT AND RESIDENTIAL CONSTRUCTION IN POSTREFORM CHINA

The objective of this study is to clarify, on the basis of detailed farm-level data derived from recent surveys, the importance of factors related to tenure security, farm size, and credit availability in determining farmers' agricultural investment. The next section provides a description of the study areas. It is followed by a discussion of factors affecting farm investment and a description of investment patterns in the study areas. A formal model of farmers' consumption and investment decisions and the results of an econometric analysis are then presented. The last section summarizes the study. The data confirm the well-established upsurge in the acquisition of consumer durables and residential investment in rural areas. They also demonstrate that productive investment was substantially lower than investment in housing, raising the question of whether there were factors that inhibited productive investment, thereby encouraging other investments. The analysis shows that the extremely small size of farms in some areas could become a factor hindering investment and land productivity, as the indivisibility of capital introduces increasing returns to scale. -from Authors