The Relation between Financial Expenditure for Agriculture（FEA）and Per Capita Net Income of Farmers（PCIF）：A Case Study of Jiangsu Province

Qian ZHANG

Business School of Yangzhou University，Yangzhou 225127，China

Agriculture is basic industry of China and agricultural development is indispensible to financial support.How to allocate financial revenues to build rural areas and support farmers is a wide concern.The core part of＂three rural issues＂（agriculture，rural areas and farmers）is farmers，while the core issue of farmers lies in the income.No.1 Central Document 2014 stated that government will also establish a long-term mechanism for sustainable agricultural development and a new agricultural management system，and meanwhile balance rural and urban development.China should improve its national food security system，deepen rural land system reform and improve rural governance，while intensifying support and protection for agriculture and promoting financial support for rural areas.At present，the urban-rural income gap of Jiangsu Province is widening.Farmers have great difficulty in increasing their income，and infrastructure construction concerning vital interests of farmers and social public utilities develop slowly.In this situation，it is difficult to increase farmers’income only through their investment.Therefore，financial expenditure for agriculture becomes an inevitable choice.In this context，it is of great realistic significance to study the influence of financial expenditure for agriculture on per capita net income of farmers.

1 Documentary overview

1.1 Overview of foreign researchesForeign scholars have made in-depth researches on financial expenditure for agriculture from many perspectives，and their findings lay certain theoretical foundation for future researches.Many practical and feasible macroeconomic policies are also evolved from their findings.In The Wealth of Nations，Adam Smith stated that government should attach great importance to agriculture，and capital should be invested in agriculture to bring agriculture with sufficient capital.Harrod and Domar applied dynamic analysis method and stated that higher investment repayment or investment scale can realize higher growth rate of agriculture.Rostow put forward the theory of stages of economic growth and stated that financial expenditure for agriculture has stages.In Transforming Traditional Agriculture，Schultz stated that traditional agriculture should be transformed to promote economic growth，government should increase investment in transforming traditional agriculture，and modern agriculture is favorable for economic growth.

1.2 Overview of domestic researches At present，domestic scholars have made extensive researches on financial expenditure for agriculture.The difference mainly lies in research points，methods and ranges.In major research points of financial expenditure for agriculture，Department of Agriculture of Ministry of Finance compared similarities and differences of agricultural subsidy policies between Italy and the UK，and came up with pertinent recommendations according to actual situations of China.From the perspective of contribution of financial expenditure of Gansu Province for farmers’income，Yang Linjuan and Dai Hengzhao concluded that expenditure for agricultural production，capital construction of agriculture，and agricultural science and technology is a motive force for increasing farmers’income［1］.From the perspective of total amount and structure of financial expenditure for agriculture，Liu Han found that the total amount of financial expenditure for agriculture is insufficient and the structure needs further optimization and development［2］.Feng Mingchuan and Wu Ping analyzed performance of financial expenditure for agriculture from the perspective of developing modern agriculture and found that the performance of financial expenditure for agriculture is low［3］.From the difference of original endowment，Zhao Lu and Lu Jie analyzed performance of China’s financial expenditure for agricul-ture in different times and different economic regions，and elasticity of gross agricultural product（GAP）and respective output of agriculture for total financial expenditure for agriculture［4］.Hu Yunxia studied the relation between financial expenditure for agriculture and growth of farmers’income，and found that there is long term stable positive relation between financial expenditure for agriculture and per capita net income of farmers，indicating that financial expenditure has promotion function for farmers’income［5］.From the perspective of scale of financial expenditure for agriculture，Xu Qianmade an empirical study on benefit brought by financial expenditure for agriculture taking Jiangsu Province as an example［6］.

In research methods of financial expenditure for agriculture，Li Huanzhang and Qian Zhonghao studied the relation between financial expenditure for agriculture and agricultural growth by causal analysis and structural analysis methods，and stated that agricultural growth is closely related with financial expenditure for agriculture［7］.Chen Wei and Yang Chunhe，using C2R model of data envelop analysis（DEA）method，analyzed and evaluated technology and effect of fund input of development-oriented poverty reduction in Hebei Province［8］.Using multiple regression and Granger Causality Test，Shen Kunrong and Zhang Jing studied the relation between rural public expenditure，growth of farmers’income，and urban-rural income gap［9］.From stationarity of time series and lagging in effect of explanatory variables on explained variables，through distribution lagging model，Tan Cunna proved that there is long-term stable positive relation in between，and financial expenditure for agriculture of three periods（the period before earlier stage，earlier stage，and current stage）has significant influence on per capita net income of farmers at current stage［10］.Through co-integration analysis，impulse response analysis and variance analysis，Zhao Lu and Lu Jie studied different contribution rate of financial expenditure at different stages to the gross agricultural product［11］.Using Granger Causality Test，Yang Jianli and Yue Zhenghua found that increase in farmers’income is caused by increase in financial expenditure for agriculture；using Unit Root Test，they found that both farmers’income and financial expenditure for agriculture are non-stationary times series（stationary series can be obtained through calculating second-order difference），and farmers’income and financial expenditure for agriculture may be out of balance in short period，but has long-term co-integration relation［12］.

In the research range of financial expenditure for agriculture，there are basically two types：one is based on the whole country，and the other is based on provinces.Most researches based on the whole country took total amount of financial expenditure for agriculture as a variable influencing farmers’income，and reached the conclusion that financial expenditure for agriculture is positively correlated with farmers’income［5，10，12］.Most researches based on provinces analyzed influence of financial expenditure for agriculture on agricultural development and increase in farmers’income，and they reached different conclusions［5］.

These extensive and detailed researches not only provide theoretical foundation for financial support for agriculture，but also provide scientific and reasonable basis for implementation of financial support for agriculture in China.Jiangsu Province is a large agricultural province in China，but few scholars have made researches on financial expenditure for agriculture in Jiangsu Province.Application of software R is also not common.The development of Southern Jiangsu，Central Jiangsu，and Northern Jiangsu is not balanced，similar to Eastern，Central，and Western regions of China.Therefore，research of Jiangsu financial expenditure for agriculture is of typical significance.

2 Current situation of financial expenditure for agriculture in Jiangsu Province

2.1 Although total absolute amount of financial expenditure for agriculture increases year by year，the proportion into total financial expenditure has high fluctuationJiangsu Province’s financial expenditure for agriculture is mainly used to support agricultural production，operating expenses of agriculture，water conservancy，forestry and meteorological departments，comprehensive development of agriculture，rural capital construction，and three categories of scientific and technological expenses.Since the reform and opening-up，especially in recent years，Jiangsu Province’s financial expenditure for agriculture is increasing year by year.As shown in Table1，financial expenditure of Jiangsu Province for＂three rural issues＂increased from 920 million yuan to 75 410million yuan，having an annual growth of31.6%.The total amount of financial expenditure for agriculture in 2012 reached 82.0 times that of1990.

Table 1 Jiangsu Province's financial expenditure for agriculture in 1990－2012（unit：108 yuan）

Although total absolute amount of Jiangsu Province’s financial expenditure for agriculture increases year by year，the proportion into total financial expenditure has high fluctuation.As shown in Fig.1，from 1990 to1993，the percentage of financial expenditure for agriculture into total financial expenditure rises from 9.1%to 11.7%；from 1994－2003，the percentage takes on decline trend，due to local government eager for quick success，neglecting expenditure for fundamental agriculture，and lack of restraint mechanism；from 2004－2012，the percentage takes on fluctuating rise trend.

Fig.1 Percentage of Jiangsu Province's financial expenditure for agriculture into total financial expenditure

2.2 Structure of financial expenditure for agriculture is not balancedJiangsu Province’s financial expenditure for agriculture mainly includes support agricultural production，operating expenses of agriculture，water conservancy，forestry and meteorological departments，agricultural capital construction，and three categories of scientific and technological expenses，and other expenses.We only collected data of financial expenditure for agriculture in 1985－2002，because the Statistical Yearbook of Jiangsu Province has not listed detailed data of financial expenditure for agriculture since 2003.

Fig.2 Changes of structure of Jiangsu Province's financial expenditure for agriculture

From Fig.2，we can see that before 1995，the percentage of financial expenditure for agriculture has high fluctuation；in 1995－2002，it takes on rising trend；the percentage of operating expenses for supporting agricultural production and agriculture，forestry，water and gas departments takes on wavy decline trend；the change of expenditure for agricultural capital construction is relatively stable before 1997；later，it has slight rising，but finally it takes on decline trend；the percentage of three categories of scientific and technological expenses is relatively low.In 1985－2002，the structure of Jiangsu Province’s financial expenditure for agriculture has high fluctuation and takes on unstable state.Therefore，the structure of Jiangsu Province’s financial expenditure for agriculture needs further optimization and development.

3 Empirical analysis on Jiangsu Province's financial expenditure for agriculture and farmers' income

3.1 Data source and variable selectionConsidering data availability，due to loss and discontinuity of data before 1990，we selected data of1990－2012 to analyze.This period includes two groups of vectors，i.e.per capita net income of farmers（PCIF）and financial expenditure for agriculture（FEA）.All data were selected fromStatistical Yearbook of Jiangsu Province（1991－2013）.Besides，we built model PCIF－FEA with total amount of financial expenditure for agriculture as explanatory variables and per capita net income of farmers as explained variable.

Table 2 PCIF－FEA of Jiangsu Province in 1990－2012（unit：yuan）

3.2 Model regression［13］According to the above data：＞plot（FEA，PCIF）

Fig.3 Dot plot of per capita net income of farmers and financial expenditure for agriculture

From Fig.3，we can see that the financial expenditure for agriculture is positively correlated with per capita net income of farmers.This means that the more financial expenditure for agriculture will bring the more per capita net income of farmers.

Fit a linear regression model with the function lm：PCIF＝2.529e＋03＋1.392e－07 FEA，establish an object of linear model，and return respective variable coefficient and other different data.

Fig.4 Diagnosis of the model

Through diagnosis，no significant problem is found and following regression model is obtained：PCIF＝2.529e＋03＋1.392e－07 FEA.

We conduct variance analysis of the regression model and obtain following results（ANOVA Table）：

4 Conclusions and recommendations

4.1 ConclusionsThrough the above analysis，we reach following conclusions：the financial expenditure for agriculture is closely connected with growth of per capita net income of farmers；financial expenditure for agriculture is a factor influencing changes of per capita net income of farmers；financial policies of Jiangsu Province in agricultural production and development are effective，and financial expenditure for agriculture has become reliable guarantee for growth of farmers’income.Therefore，practically enforcing and constantly implementing the policy of financial expenditure for agriculture is still an important policy for promoting development of agriculture and increase of farmers’income in Jiangsu Province.

4.2 RecommendationsFirstly，it is recommended to establish long-term stable growth mechanism for financial expenditure for agriculture，guarantee stable growth of financial expenditure for agriculture，ensure fund utilization efficiency，bring into play gathering advantage of financial expenditure for agriculture，constantly improve integrated agricultural production capacity and overall agricultural development level，and effectively promote development of rural areas and agriculture and increase of farmers’income.

Secondly，it is recommended to optimize structure of the financial expenditure for agriculture and bring into play functions of the financial expenditure for agriculture to the maximum extent.Through increasing direct subsidy for farmers and reducing subsidy in circulation processes，it is recommended to increase support for three categories of agricultural science and technology and reduce percentage of various operating expenses，to optimize investment structure.

Finally，it is recommended to balance investment amount for agriculture in all regions.Since economy of Jiangsu Province takes on gradient development and there is a large gap between farmers’income，it is required to increase investment in Northern Jiangsu and Central Jiangsu.Then，it is expected to promote balance of Southern Jiangsu，Central Jiangsu and Northern Jiangsu，which will directly benefit farmers and promote increase of farmers’income.

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