The Agricultural Subsidy: Reforming Advice

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The Agricultural Subsidy Reforming Advice

• Group 3
• Guo Yanqin
• Peng Chao
• Yang Fan
• Zhuang Shasha

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Introduction

• Why? The background of the policy
• Zhuang Shasha
• How? The method of the subsidy
• Guo Yanqin
• Whats more?
• Yang Fan Zhuang Shasha
• The Limitations of present policy
• Solutions Only personal opinion

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The Background of this policy

• Background

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Different Subsidizing Methods

• Subsidize the peasants according to the Taxed
  Area (STA)
• Subsidize the peasants according to the Taxed
  Normal Production (STNP)
• Subsidize the peasants according to the Area
  Actually Planted (SAAP)
• Subsidize the peasants according to the Amounts
  Actually Sold (SAAS)

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The Effect of the Subsidy
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The Effect of the Subsidy

• 1?????????????
• The rapid growth of farmers income
• ?13??????????,?????????????????????7.4???,2004???
  ??,???????????1603.19?,???????261.05?,????????????
  11.4???????????????,????????,
  ?????????????????????9.8?

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The Effect of the Subsidy

• 2??????????,???????????????
• growing incentives, increased planting areas
• ??,2004????????????897???,?????0.5,??,???????????
  10???????????????????????????,??,???
  ?????????????????43.1????14.5????

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The Effect of the Subsidy

• 3??????????
• Increase the yield
• ????????????4270??,?????701.5??,??????????????????
  ?????150?????

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The Effect of the Subsidy

• 4?????????
• Smoother relationship between leaders and farmers

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The problems of the direct subsidy

• First, there are faults in the way of direct
  subsidy
• 1st, If subsidize the peasant according to the
  planting area
• 2nd,If subsidizethe peasants according to the
  production

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The problems of subsidy

• Second, there are faults in the operation of
  direct subsidy
• 1st, there are faults in the subsidy standard
• 2nd,the managment cost is high
• 3rd,the local government may distort the policy
  and take up the subsidy fund.

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Reforming Advice

• Direct subsidy is not enough
• We do not negate the policy of direct subsidy, I
  only want to give some suggestion

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Advice for direct subsidy

• Fisrt ,the subsidy object

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Advice for direct subsidy

• Second ,the subsidy scope

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Advice for direct subsidy

• Third the subsidy standard

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Advice for direct subsidy

• Fourth establish the relevant matching system
  and effective supervising organization

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A wider vision

• We should not have the tunnel vision for direct
  subsidy
• The present policy is only the temporary solution
  for the problem of food security and higher
  incomes

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The Market Support

• We should not abolish the market support
• The price support
• The machinery subsidy
• high-quality seed subsidy
• Tech and H.R. support

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The Market Support

• The price support/subsidy
• At first, pay money to the peasants according to
  the production or area
• Then, when the price is too low, we can pay them
  for the second time
• According to the sales
• The central government should bear this budget.

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Technology

• what the peasants will do after they get money?
• Investment fertilizer, the machines
• Not technical innovation RD
• Risks
• Market failure A simple Game Theory model

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Failure
Ronald
No innovation
innovation
Ronald gets ? 4,000
Ronald gets ? 3,000
No innovation
Ben gets ? 4,000
Ben gets ? 6,000
Ben
Ronald gets ? 5,000
Ronald gets ? 6,000
innovation
Ben gets ? 3,000
Ben gets ? 5,000
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• Education and Human Capital
• Poverty Reduction
• Improving the Productivity of the Agriculture

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Why the peasants dont want to get higher
education?

• Nobody pay the tuition for them or their children
• And Externality

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Different investor bring different benefit
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Expected Results

• Enforce our food security
• Higher rural income
• Sustainable Development of Rural Area

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The gainer and the loser

• The peasants are the gainers
• From whom we get money to subsidize the peasants?
  
• The consumer, the citizens
• The industrial company

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Possible compensation

• Pigovian tax
• Tradable pollution permits
• A immature opinion for discussion
• The education stamp
• For childrens education
• Or technology education

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