Off-farm work and technical efficiency of wheat production in China

Abstract

The present study examined the effect of off-farm work on the technical efficiency (TE) of wheat production, using data collected from farming households in China. We mainly explored four dimensions of off-farm work, including the household heads’ off-farm work participation, local off-farm work participation, migrated off-farm work participation, and off-farm work intensity. To further our understanding, we also measured off-farm work variables at the household level (i.e., number and ratio of off-farm workers in a household and off-farm income) and estimated their impacts on TE. A stochastic production frontier model was used to estimate the TE of wheat production. Given that off-farm work variables are potentially endogenous due to self-selection issues, we employed a two-stage residual inclusion (2SRI) approach to address such endogeneity problems. The findings from our study revealed that off-farm work participation of household heads exerted a positive and significant impact on TE. Local off-farm work participation showed a significant positive effect on TE but migrated off-farm work participation did not indicate any significant effect on TE. Although off-farm work intensity does not show a significant impact on TE, further analysis using intensity dummies suggested that off-farm work intensity tends to increase TE of wheat production when household heads work off-farm between 9 and 12 months. Additional analysis suggested that a higher TE of wheat production is not necessarily associated with the number and ratio of off-farm workers in a household and off-farm income. Generally, our research has supported the positive impact of off-farm work on TE of crop production from multiple dimensions. We found that TE is positively and significantly influenced by the household heads’ age, health status, and farm size but negatively and significantly affected by distance to the market. Our findings underscore that off-farm work participation is a critical pathway for smallholder farmers to boost efficient farm production. From the perspective of promoting production efficiency, our research shows that it is essential to encourage household heads to participate in off-farm work locally, especially those unable to migrate due to household responsibilities. Therefore, the policy aiming to achieve efficient production should consider cultivating and developing industries with local characteristics, which can help create more off-farm work opportunities. Disseminating local off-farm work information via accessible channels, such as radios or message services of smartphones, and providing job-seeking subsidies might make a difference in encouraging household heads’ off-farm work participation. Farmers’ health status is positively associated with a higher TE. The finding underscores the importance of saturating health knowledge among rural farmers to improve their health levels and human capital.