Examining the determinants and efficiency of China's agricultural exports using a stochastic frontier gravity model.

Abstract

This paper aims to examine the key determinants and efficiency of China's agricultural exports with its 114 importing countries by applying the Stochastic Frontier Analysis (SFA) on an augmented gravity model for the period of 2000-2019. The Poisson Pseudo Maximum Likelihood (PPML) and the fixed effect models were also estimated simultaneously to confirm the robustness of our findings. The results reveal that China's economic size (GDP) and its importing countries, the Belt and Road Initiative (BRI), common border, and the Chinese language positively determine China's agricultural export flows. The results, on the other hand, also reveal that China's agricultural export is adversely influenced by the income (per capita GDP) of China and its trade partners, currency depreciation, distance, and landlocked. On an average account, China has untapped the potential of 51% in its agriculture export with the countries used in this study. We provide policy suggestions as part of our study.