The effect of Chinaʹs agricultural tax abolition on rural familiesʹ incomes and production

This paper uses the rural household panel data collected by Research Center for Rural Economy to evaluate the impacts of Chinaʹs agricultural tax abolition during 2004–2005 on farmersʹ income and production behavior. We find that the abolition of agricultural tax did not significantly affect agricultural production. The effects on input use and productivity are also found statistically insignificant. All these are consistent with the lump-sum property of the tax and imply little effect of the tax abolition on relaxing credit constraints to farmers. Finally, we find that the tax abolition did not increase farmersʹ net income significantly.