Agricultural productivity changes induced by the sloping land conversion program: an analysis of Wuqi county in the Loess Plateau region.

This paper examines the agricultural productivity change induced by the Sloping Land Conversion Program (SLCP) using the Malmquist index method and household data collected from Wuqi. We find that during the period of 1998-2004, the total factor productivity (TFP) grew by 15.8%. While numerous households suffered a TFP decline, the majority of them experienced a large gain. By decomposing the TFP, we further show that its increase is due exclusively to the improvement of technical efficiency rather than to technological change. To validate these findings and put them in perspective, we also estimated the TFP change with county-level aggregate data. It is revealed that driven by technological change and scale efficiency, the TFP grew slightly during the period of 1992-1998. Because of the tremendous cropland reduction and production mode shift caused by implementing the SLCP, the TFP declined substantially during the first three years of the program; due to continued improvement of technical efficiency; however, its growth accelerated later. Altogether, our evidence consistently suggests that implementing the SLCP has contributed to the agricultural TFP growth in the longer term and that the efficiency improvement has resulted mainly from the increased public expenditures for extension services and diffusion of technical knowledge. Wuqi's experience proves that it is possible to achieve environmental conservation and increase productivity simultaneously, even when facing a cropland reduction and production mode alternation.