Abstract:
The introduction of direct subsidies to farming households and the development of farmer cooperatives has provided two important approaches to China’s twenty-first century food policy challenges. However, research undertaken largely separates and focuses on subsidies or cooperatives.
This neglects their interaction and complementarities. This article seeks to rectify this omission
using a survey from 35 farmer specialized cooperatives (FSCs) and 561 farming households in
16 provinces, based on a two-stage treatment effect model. The findings suggest FSCs have
become important organizations that improve farmers’ net income. Moreover, usage of agricultural machinery and direct subsidies also result in higher net income, though they have little
impact on farmers’ machinery investment. The results provide an evidence source that contributes to debate concerning government subsidy policy. Policy may act more like an income transfer program, since it has little impact on farmers’ investment in agriculture. The study also
highlights that there are complementary effects between FSCs and direct subsidies, and that
China’s cooperative policy integrated with direct subsidies could be progressive.
