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Engel curve, farmer welfare and food consumption in 40 years of rural China

Xiaohua Yu (Courant Research Center-PEG, University of Göttingen, Göttingen, Germany)

China Agricultural Economic Review

ISSN: 1756-137X

Article publication date: 5 February 2018

1148

Abstract

Purpose

The purpose of this paper is to review the theoretical background, methodological extensions, and empirical applications of the Engel curve, which is applied to the research of the change in farmers’ welfare and food demand in China after the economic reform in 1978, compared with the statistics of income and food consumption.

Design/methodology/approach

This paper mainly uses the traditional method of Engel curve, which is compared with income growth and food consumption, to study farmers’ welfare improvement in rural China.

Findings

The Engel coefficients identify three different stages for farmers’ welfare change after 1978. The first stage is the period between 1978 and 1988, in which farmers’ welfare has been continuously enhanced due to the institutional bonus of the 1978 economic reform and increased government purchase price of agricultural products. The second stage is the period between 1989 and 1995, in which farmers’ welfare has been slightly deteriorated mainly due to the end of institutional reform bonus, suppressed food prices, relative high inflation, and instable political situation. The third stage is the period after 1995, in which farmers’ welfare returns to a growing path, as the dual price system was abolished, the transition from a planned economy to a market economy had been completed, and the government carried out protective policies for agriculture and started to heavily subsidize agriculture. The Engel coefficient still remained at a very high level at 0.59 in 1995, but it continuously decreased to 0.33 in 2015. The welfare enhancement for farmers mainly results from deepened market-oriented reform, protective policies for agriculture, and prevalent off-farm employment. The Engel coefficient is also linked to food demand elasticities. Along with the decreasing Engel coefficient in the past 40 years, income elasticities also continuously decrease from 0.55 in 1978 to 0.08 in 2015. Food demand is very inelastic now, and any further increase in income will not substantially increase food demand any more.

Research limitations/implications

Inequality has not been analyzed.

Originality/value

This paper reviews the methodological advantages of the Engel curves, and uses it to identify different stages of welfare change and estimate income elasticities of food demand for farmers in China after the 1978 economic reform.

Keywords

Acknowledgements

The author thanks the precious comments from Dr Te Bao from the Nanjing Technological University and Qiran Zhao from the China Agricultural University. The funding support from Natural Science Foundation of China (Project ID: 71633005) is also acknowledged by the author.

Citation

Yu, X. (2018), "Engel curve, farmer welfare and food consumption in 40 years of rural China", China Agricultural Economic Review, Vol. 10 No. 1, pp. 65-77. https://doi.org/10.1108/CAER-10-2017-0184

Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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