The 1996 Agricultural Census provides a unique dataset to analyze various issues on rural development in China. In particular, it provides very detailed data on rural infrastructure, education, and science and technology. This paper is an early attempt to use this data set. Partly due to the limited access, the data we have is not complete, covering only 45% of the country. We will pursue more detailed and more thorough analyses once we have a complete data for all counties.
Despite the crudeness of the data and model we used, the results do shed new lights. First, rural infrastructure and education play a more important role in explaining the difference in rural nonfarm productivity than agricultural productivity. Because the rural nonfarm economy is a major determinant of rural income, investing more in rural infrastructure is key to an increase in overall income of the rural population. Second, the lower productivity in the western region is explained by its lower level of rural infrastructure, education, and science and technology. Therefore, improving both the level and efficiency of public capital in the west is a must to narrow its difference in productivity with other regions.
This research merely serves as a touchstone for future research. One of the urgent future research topics is to search different policy options to mobilize resources to support public good provisions for the less developed western region. Under the current fiscal decen- tralization scheme, financing infrastructure in regions with a small nonfarm sector faces a great challenge. Lack of local revenues is one of the major causes of underinvestment in the less developed western region.