In our report, our overall goal is to understand how soybean trade policy changes and changes in soybean trade flows that China has experienced between 1997 and 2003 have affected China's producers, consumers and users of soybeans. To do so, we will:

1. briefly analyze the nature of China's soybean markets; and understand the nature of the links between soybean trade, domestic market development, price, production, and consumption;

2. analyze the responses of households that are affected by soybean trade-related changes;

3. predict the magnitude and direction of responses to trade liberlalization-induced price shifts and suggest if policies are needed to offset adverse effects

In order to meet these objectives, we will describe in great detail using a number of data sets: the nature of soybean markets in China; the linkages between soybean producers, consumers and poverty; use our CAPSIM model to understand the impacts of trade changes on soybean producers, livestock producers and consumers; and finally discuss policy options.

The objective of this research project was to (1) collect and analyze enterprise budget data for the production of cotton in major production regions in the People's Republic of China; (2) Compare and contrast the cost of production of Bt and conventional cotton in the these regions; and (3) Compare and contrast the information for China with representative budgets for U.S. cotton production to assess current relative competitiveness between the two and potential implications for Chinese cotton import demand. The survey was conducted on 1027 plots of 450 farmers in 5 provinces, Hebei, Shandong, Henan, Anhui and
Hubei in 2005. The results indicate the cost of production of cotton in China on average is significantly less on a per acre basis than in the U.S. Differences are sensitive to assumptions regarding labor costs in China. In addition with high yields per acre some U.S. cotton producing regions remain competitive despite labor cost disadvantages. Recent reports indicate that despite cost of production advantages the desire on the part of the Chinese government to maintain grain production may discourage increased cotton production in certain regions decreasing potential negative effects on future cotton import demand. The survey effort was extended in 2006 to include 480 plots of 120 farmers in the largest single cotton producing province, Xinjiang.

This paper investigates whether there is a non-linear relationship between income and the private transfers received by households in developing countries. If private transfers are unresponsive to household income, expansion of public social security and other transfer programs is unlikely to crowd out private transfers, contrary to concerns first raised by Barro and Becker. There is little existing evidence for crowding out effects in the literature, but this may be because they have been obscured by methods that ignore non-linearities. If donors switch from altruistic motivations to exchange motivations as recipient income increases, a sharp non-linear relationship between private transfers and income may result. In fact, threshold regression techniques find such non-linearity in the Philippines and after accounting for these there is evidence of serious crowding out, with 30 to 80 percent of private transfers potentially displaced for low-income households [Cox, D., Hansen, B., and Jimenez, E., 2004, How responsive are private transfers to income? Evidence from a laissez-faire economy, Journal of Public Economics.]. To see if these non-linear effects occur more widely, semiparametric and threshold regression methods are used to model private transfers in four developing countriesChina, Indonesia, Papua New Guinea, and Vietnam. The results of our paper suggest that non-linear crowding-out effects are not important features of transfer behaviour in these countries. The transfer derivatives under a variety of assumptions only range between 0 and -0.08. If our results are valid, expansions of public social security to cover the poorest households need not be stymied by offsetting private responses.

Complementarity between incentive instruments is regarded as one of the central themes of theoretical research in the economics of industrial organization in recent years. However, despite its importance, empirical evidence on the existence of complementarities is limited. In this paper we identify complementarities between incentive mechanisms used by firm-owners to motivate managers. Using a multi-task principal-agent framework we consider a problem in which the owner uses two incentive instruments, profit-sharing and investment-bonding, to motivate the manager in two tasks, production and asset-maintenance. Our theoretical model yields testable hypothesis regarding the complementary and individual effects of incentives on performance. We test the hypothesis of our theoretical model against a dataset on 56 rural firms in China, observed in 1988 and 1995. Our descriptive results clearly show that the two instruments are complements. Our econometric model using a panel regression framework confirms that significant complementaries exist in terms of the impact of the two instruments on performance. In order to evaluate the robustness of our results we account for unobserved differences in firm quality using fixed effects and instrumental variables regressions. Support for the complementarity hypothesis is also found after controlling for unobserved heterogeneity.

Dairy farms in China's suburban areas have been playing an important role in providing urban markets with fresh milk. With the rising demand for fluid milk and dairy products in the cities, there is a perception that small and scattered dairy farms in China's provinces are gradually disappearing and more concentrated dairy cattle farming is being formed near suburban areas. This paper uses farm-level survey data and stochastic input distance functions to make estimates of total factor productivity (TFP) on suburban dairy farms, as well as for the entire dairy sector. The results show that over the past decade TFP growth has been positive on suburban dairy farms, and this rise in productivity has been driven mostly by technological change. However, at the same time we find that, on average, the same farms have been falling behind the advancing technical frontier. We also find one of the drivers of the suburban dairy sector is the relatively robust rate of technological change of these farms, which has been more rapid than on farms in the dairy sector as a whole. The results suggest efforts to achieve greater adoption of new technologies and better advice on how to use the technologies and manage production and marketing within the suburban dairy sector will further advance productivity growth in the sector.