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The interplay of production commercialisation and specialization: An empirical study on Chinese smallholders

Lihua Li (State Key Laboratory of Grassland Agro-ecosystems, Lanzhou University, Lanzhou, China) (School of Science and Health, Western Sydney University, Penrith, Australia)
Maria Estela Varua (DAP Economics, Finance & Property, School of Business, Western Sydney University, Sydney, Australia)
Adam M. Komarek (International Food Policy Research Institute, Washington, District of Columbia, USA)
Sriram Shankar (Centre for Social Research and Methods, College of Arts and Social Sciences, Australia National University, Canberra, Australia)
William D. Bellotti (School of Science and Health, Western Sydney University, Penrith, Australia)

China Agricultural Economic Review

ISSN: 1756-137X

Article publication date: 6 November 2017

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Abstract

Purpose

The purpose of this paper is to explore the endogenous relationship between production specialisation and market commercialisation with an empirical study of farmers in Northwest China.

Design/methodology/approach

The three-stage least squares were used to address simultaneity and over-identification problems in comparison with two-stage least squares (2SLS). The Durbin-Wu-Hausman test was employed to identify the endogeneity of the commercialisation and specialisation variables. The validity, relevance, and strength of the instruments were tested using the Stock-Yogo weak instrument diagnostics test.

Findings

A two-way interrelationship between specialisation and commercialisation were confirmed, and suggest that farmers’ decisions on farm commercialisation and production specialisation are actually separate and interacting.

Social implications

By demonstrating that a virtuous cycle exists between agricultural commercialisation and on-farm specialisation, policies can be formulated to complement these two effects that may help increase small holders’ income. Farmers’ market participation can be indirectly improved by combining market improvement and risk management tools to encourage production specialisation.

Originality/value

The insights of this study cast further light onto the farm market participation theory by emphasising that higher asset endowments enable small farmers to specialise in production with comparative advantage.

Keywords

Acknowledgements

This study is funded by the Australian Centre of International Agricultural Research (ACIAR) John Allwright Fellowship. The authors declare that they have no conflict of interest.

Citation

Li, L., Varua, M.E., Komarek, A.M., Shankar, S. and Bellotti, W.D. (2017), "The interplay of production commercialisation and specialization: An empirical study on Chinese smallholders", China Agricultural Economic Review, Vol. 9 No. 4, pp. 504-521. https://doi.org/10.1108/CAER-08-2016-0122

Publisher

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Emerald Publishing Limited

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