The Economic Joumal 110(Januar), 136-158. C Royal Economic Society 2000. Published by Blackwell Publishers, 108 Cowley Road, Oxford Ox4 F, UK and 350 Main Street, Malden, MA O2148, USA FOOD AVAILABILITY. ENTITLEMENTS AND THE CHINESE FAMINE OF 1959-61* Justin Yifu Lin and Dennis Tao Yang Food availability decline and Sens entitlement are two leading appro understanding causes of famine. Previous research based on case studies has give ach approach. This paper analyses the Chinese famine of 1939-61 by considering jointly th rban bias and the decline in food availability as causes. We find that both factors contributed significantly to the increase in death rates during this famine. To our knowledge, this paper is the first econometric study to assess the importance of famine causes using the entitlement approach The problem of famines and food shortages has received much attention from economists because such crises continue to occur despite persistent progress in agricultural production technology. The traditional approach to famine analysis, which dates back to the writings of Adam Smith and Malthus, proposes that famines are primarily caused by a sudden decline in food availability (FAD). For example, a war or a natural calamity may decimate agricultural production in a particular geographic region and result in spread food shortages that lead to famine. This supply-based FAD accour an accepted explanation for famines before the influential work of Sen 1981a, b), who proposed a more general entitlement approach. Sen empha- sised that famine was a situation in which a significant number of people in a region failed to acquire enough food to eat. While a shortage in per capita food output may cause famine, it is only one of many possible causes. In his studies of several well known historical famines. Sen found that famines occurred even when per capita food output was maintained. Famines resulted either from sudden collapses in the endowments of population subgroups or from dra- matic changes in relative prices, which caused some of the population to fail to acquire enough food While the entitlement approach has been accepted by many famine analysts proponents of the FAD approach have offered criticism. Instead of examining food availability at aggregate levels as Sen did, opponents emphasise local supply conditions. They argue that crop failures due to natural calamities often result in high food prices because of supply shortages, speculative behaviour, increased demand to deal with uncertainty, and sales of possessions to obtain food. Ultimately, the poor and those who are negatively affected by bad weather become famine victims because of reduced purchasing power. Since indebted to the participants in thos rs for their Robert marshall. Martin Ravallion I See, for example, Seaman and Holt(1980), Cutler(1984)and Bowbrick(1986). Ravallion(1997) provides a comprehensive description of the entitlements approach and its critics
FOOD AVAILABILITY, ENTITLEMENTS AND THE CHINESE FAMINE OF 1959±61 Justin Yifu Lin and Dennis Tao Yang Food availability decline and Sen's entitlement are two leading approaches in understanding causes of famine. Previous research based on case studies has given independent support to each approach. This paper analyses the Chinese famine of 1959±61 by considering jointly the urban bias and the decline in food availability as causes. We ®nd that both factors contributed signi®cantly to the increase in death rates during this famine. To our knowledge, this paper is the ®rst econometric study to assess the importance of famine causes using the entitlement approach. The problem of famines and food shortages has received much attention from economists because such crises continue to occur despite persistent progress in agricultural production technology. The traditional approach to famine analysis, which dates back to the writings of Adam Smith and Malthus, proposes that famines are primarily caused by a sudden decline in food availability (FAD). For example, a war or a natural calamity may decimate agricultural production in a particular geographic region and result in widespread food shortages that lead to famine. This supply-based FAD account was an accepted explanation for famines before the in¯uential work of Sen (1977, 1981a,b), who proposed a more general entitlement approach. Sen emphasised that famine was a situation in which a signi®cant number of people in a region failed to acquire enough food to eat. While a shortage in per capita food output may cause famine, it is only one of many possible causes. In his studies of several well known historical famines, Sen found that famines occurred even when per capita food output was maintained. Famines resulted either from sudden collapses in the endowments of population subgroups or from dramatic changes in relative prices, which caused some of the population to fail to acquire enough food. While the entitlement approach has been accepted by many famine analysts, proponents of the FAD approach have offered criticism.1 Instead of examining food availability at aggregate levels as Sen did, opponents emphasise local supply conditions. They argue that crop failures due to natural calamities often result in high food prices because of supply shortages, speculative behaviour, increased demand to deal with uncertainty, and sales of possessions to obtain food. Ultimately, the poor and those who are negatively affected by bad weather become famine victims because of reduced purchasing power. Since The Economic Journal, 110 ( January), 136±158. # Royal Economic Society 2000. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA. [ 136 ] An earlier version of this article was presented at Chicago, Duke, Hong Kong University of Science and Technology, and University of North Carolina. We are indebted to the participants in those seminars for their insightful comments. We are also grateful to Robert Marshall, Martin Ravallion, Dudley Wallace, and especially Costas Meghir and an anonymous referee for helpful suggestions. 1 See, for example, Seaman and Holt (1980), Cutler (1984) and Bowbrick (1986). Ravallion (1997) provides a comprehensive description of the entitlements approach and its critics.
LJANUARY 2000 THE CHINESE FAMINE OF 1959-61 137 crop failures initiate the chain of effects, the proponents of this approach argue that the best way to understand famines is to look at what happened food availabil Although Sen has amply demonstrated that famine could occur without reduction in per capita food supply, his measures of availability are defined at either national or highly aggregated regional levels, which may not directl refute the propositions of FAD proponents who emphasise local conditions. A formal assessment of the entitlement approach is further obstructed by other data limitations, such as the lack of records on personal property and detailed market commodity prices. More importantly, previous research has not meas ured separately the contributions of food supplies and other entitlement arrangements to a famine. As a result, we still do not know the relative importance of the famine causes o In this paper, we analyse the Chinese famine of 1959-61, where the drop in od availability and different arrangements of rights to food were both important factors. Under the centrally planned regime, China had an effective, urban-biased ration system in which city residents were given legally protecte rights to acquire a certain amount of food. In contrast, compulsory grain procurement quotas were imposed on the farmers. As a result, farmers were entitled only to the residual grain. In years of poor harvest, there was barely enough grain left in the village for the farmers after they fulfilled the quotas During the Great Leap Forward in 1959-61, Chinese agricultural production collapsed because of a sudden institutional change, natural calamities and a series of policy mistakes. The grain output dropped by 15%o in 1959 and reached only about 70% of the 1958 level in 1960 and 1961. Careful studies of the newly released data reveal that this crisis resulted in widespread famines and caused about 28-30 million excess deaths (Peng, 1987 and Ashton et aL. 1984). To analyse this catastrophe, we apply Sens entitlement approach to the centrally planned system. We formulate a framework that is amenable to empirical testing and that simultaneously considers per capita food supply and the right to food as determinants of famine. A panel data set for 28 Chinese provinces for the period 1954-66 is used for the empirical analysis. We use the percentage of rural population and pe capita grain output in a province as proxies for the degree of urban bias and 2 Sen's entitlement approach de food availability decline as a cause famine. What the entitlement approach opposes is to take food availability as the See Osmani(1995) for further discussions on the differences between the FAD approach and the entitlement approach. We owe this clarification referee 3 Due to data limitations, Sen(1981a)used national per capita grain output as the indicator for food ailabil of Ethiopian and Bangladeshi famines. Presumably, per capita food supply region is a more relevant indicator. For the great Bengali famine, Sen used food availability for the district, a more local indicator, as per capita availability measures. However, Bowbric questioned the reliability of the production figure Our focus is on the causation of famine. See Coate and Ravallion (1993) for discussions on insurance arrangements and Dreze and Sen (1989, 1990)for the role of government prevention and relief. Economic Society 2000
crop failures initiate the chain of effects, the proponents of this approach argue that the best way to understand famines is to look at what happened to food availability.2 Despite the clarity of views at the theoretical level, the usefulness of the two approaches has not yet been rigorously examined in empirical analysis. Although Sen has amply demonstrated that famine could occur without a reduction in per capita food supply, his measures of availability are de®ned at either national or highly aggregated regional levels, which may not directly refute the propositions of FAD proponents who emphasise local conditions.3 A formal assessment of the entitlement approach is further obstructed by other data limitations, such as the lack of records on personal property and detailed market commodity prices. More importantly, previous research has not measured separately the contributions of food supplies and other entitlement arrangements to a famine. As a result, we still do not know the relative importance of the famine causes. In this paper, we analyse the Chinese famine of 1959±61, where the drop in food availability and different arrangements of rights to food were both important factors. Under the centrally planned regime, China had an effective, urban-biased ration system in which city residents were given legally protected rights to acquire a certain amount of food. In contrast, compulsory grain procurement quotas were imposed on the farmers. As a result, farmers were entitled only to the residual grain. In years of poor harvest, there was barely enough grain left in the village for the farmers after they ful®lled the quotas. During the Great Leap Forward in 1959±61, Chinese agricultural production collapsed because of a sudden institutional change, natural calamities and a series of policy mistakes. The grain output dropped by 15% in 1959 and reached only about 70% of the 1958 level in 1960 and 1961. Careful studies of the newly released data reveal that this crisis resulted in widespread famines and caused about 23±30 million excess deaths (Peng, 1987 and Ashton et al. 1984). To analyse this catastrophe, we apply Sen's entitlement approach to the centrally planned system. We formulate a framework that is amenable to empirical testing and that simultaneously considers per capita food supply and the right to food as determinants of famine.4 A panel data set for 28 Chinese provinces for the period 1954±66 is used for the empirical analysis. We use the percentage of rural population and per capita grain output in a province as proxies for the degree of urban bias and 2 Sen's entitlement approach does not oppose food availability decline as a cause (hypothesis) for famine. What the entitlement approach opposes is to take food availability as the only cause for famine. See Osmani (1995) for further discussions on the differences between the FAD approach and the entitlement approach. We owe this clari®cation to an anonymous referee. 3 Due to data limitations, Sen (1981a) used national per capita grain output as the indicator for food availability in the study of Ethiopian and Bangladeshi famines. Presumably, per capita food supply in a famine region is a more relevant indicator. For the great Bengali famine, Sen used food availability ®gures for the district, a more local indicator, as per capita availability measures. However, Bowbrick (1986) questioned the reliability of the production ®gures. 4 Our focus is on the causation of famine. See Coate and Ravallion (1993) for discussions on insurance arrangements and Dreze and Sen (1989, 1990) for the role of government in famine prevention and relief. # Royal Economic Society 2000 [ JANUARY 2000] 137 THE CHINESE FAMINE OF 1959±61
138 THE ECONOMIC JOURNAL LJANUARY the extent of food availability, respectively, in that province and assess their contributions to the observed cross-province differences in death rates. We find that, in normal years, the cross-province differences in the variables did not result in cross-province differences in death rates. However, in the famine period of 1959-61, both variables contributed significantly to the observed inter-provincial differences in mortality rates. To our knowledge, this paper is the first serious econometric study to assess the relative importance of famine causes using the entitlement approach. I. China's food procurement and entitlement In the entitlement approach, Sen (1981a, b) proposes that the acquisition problem is central to questions of hunger and starvation in the modern world Consider a person's endowment vector x, which may include the possession of land, labour services, health conditions, and the ownership of other proper ties. The person may produce his own food based on initial endowment, or he may exchange possessions in the market for a consumption bundle that includes food. This person starves if he fails to obtain enough food. This may occur either through a fall in the endowment vector x(direct entitlement failure), or through an unfavourable shift in the terms of exchanging proper ties for food(trade entitlement failure). Consequently FAD is not a necessary condition for famine. Towards testing his propositions, Sen recognised that there could be ambiguities in the specification of entitlement, and this problem could be compounded by data limitations. Instead of conducting statistical analysis, Sen relied heavily on the indices of rice-exchange rates and the price ratios of other products or services to rice as major indicators of changing entitlement relations. He found that sharp declines in the food- exchange rates for people in selected occupations explained many of the In contrast to the market environment where sen laid out his entitlement theory and applications, China had a planned economic structure where the cquisition and distribution of food were directly controlled by the central government. Rural people had to deliver quotas to procurement agencies at prices set by the government. A food rationing system existed in cities where urban residents had protected legal rights for certain amount of grain consumption. In this planned setting, Sens entitlement approach is still appropriate for understanding the causes of famine In the wake of the founding of the People's Republic in 1949, an in-kind gricultural tax was the main vehicle by which the state acquired grain from evolution with FAD approaches, see Osm uilibrium, for instance, entitle be well defined characterisations of a pers for additional explanation 7 In addition to Sen, Ravallion(1987)and Dyson( 1991)analysed higher food prices as a proximate C Royal Economic Society
the extent of food availability, respectively, in that province and assess their contributions to the observed cross-province differences in death rates. We ®nd that, in normal years, the cross-province differences in the variables did not result in cross-province differences in death rates. However, in the famine period of 1959±61, both variables contributed signi®cantly to the observed inter-provincial differences in mortality rates. To our knowledge, this paper is the ®rst serious econometric study to assess the relative importance of famine causes using the entitlement approach. 1. China's Food Procurement and Entitlement In the entitlement approach, Sen (1981a,b) proposes that the acquisition problem is central to questions of hunger and starvation in the modern world. Consider a person's endowment vector x, which may include the possession of land, labour services, health conditions, and the ownership of other properties. The person may produce his own food based on initial endowment, or he may exchange possessions in the market for a consumption bundle that includes food. This person starves if he fails to obtain enough food. This may occur either through a fall in the endowment vector x (direct entitlement failure), or through an unfavourable shift in the terms of exchanging properties for food (trade entitlement failure). Consequently FAD is not a necessary condition for famine.5 Towards testing his propositions, Sen recognised that there could be ambiguities in the speci®cation of entitlement, and this problem could be compounded by data limitations.6 Instead of conducting statistical analysis, Sen relied heavily on the indices of rice-exchange rates and the price ratios of other products or services to rice as major indicators of changing entitlement relations. He found that sharp declines in the foodexchange rates for people in selected occupations explained many of the famines.7 In contrast to the market environment where Sen laid out his entitlement theory and applications, China had a planned economic structure where the acquisition and distribution of food were directly controlled by the central government. Rural people had to deliver quotas to procurement agencies at prices set by the government. A food rationing system existed in cities where urban residents had protected legal rights for certain amount of grain consumption. In this planned setting, Sen's entitlement approach is still appropriate for understanding the causes of famine. In the wake of the founding of the People's Republic in 1949, an in-kind agricultural tax was the main vehicle by which the state acquired grain from 5 For an assessment of the entitlement approach that describes its conceptual apparatus, the evolution of Sen's analysis, and the contrast with FAD approaches, see Osmani (1995). 6 In the absence of a market-clearing equilibrium, for instance, entitlement may not be well de®ned. There is also a great deal of ambiguity in characterisations of a person's possessions. See Sen (1981b) for additional explanations. 7 In addition to Sen, Ravallion (1987) and Dyson (1991) analysed higher food prices as a proximate cause of food entitlement collapse. 138 [ THE ECONOMIC JOURNAL JANUARY # Royal Economic Society 2000
2000 THE CHINESE FAMINE OF 1959-61 areas 8 Grain markets existed alongside the state grain distribu system. In 1953, the central government introduced a system of Unified Procurement and Unified Sale for grain and oil-bearing crops, which broug procurement and distribution under its direct control, as a way to suppress food prices. Interprovincial grain trade by private traders was virtually eliminated. Accompanying the Unified Procurement and Unified Sale was rigid household registration system, which deprived the rural population of the right to move to urban areas and thereby put the country-to-city migration under the government's tight control. The aim of these schemes was to extract as much agricultural surplus as possible to facilitate the heavy-industry-oriented development strategy that had resulted in an increased demand for grain and other agricultural products for urban food consumption and exports. Under Unified Procurement and Unified Sale, the central government set the target for purchase of grain nationwide before a production season began. The target depended on the planned urban consumption needs, urban reserves, indus- trial materials and international trade. The target filtered down through provinces and lower levels of government until it reached the basic production units and became mandatory quotas. The quotas specified the quantity of ompulsory deliveries as well as their prices set by the state. When quotas were fulfilled, peasants were free to sell the remaining surplus to the state procure- nent departments or at state-regulated grain markets. In practice, however, because the state often procured to the maximum possible extent, farmers were left with little surplus(Walker, 1984) After harvests, grain procurement agencies in each locality collected the quotas and delivered the grain to the state. The central government then distributed the grain to the urban population in each province at subsidised prices. To control urban food demand and to facilitate the distribution of food targeted groups, food ration coupons were introduced in 1954(Walker, 984). In August 1955 the government established a more formal system and et up ration standards according to age, employment and other demographic characteristics. In subsequent years, the ration norms were adjusted, and the scope of rationing was extended to other agricultural products, including soy beans, coarse grains, cotton cloth, edible oil, and pork. cultural taxes were used by the government as 1938 in the Shansi-Gansu- Ningxia liberated Perkins, 1966). The rate was set at 12% normal yield in the early 1950s. The ate fell to 1970 and then to 5% in 1978(Perkins an f, 1984). The share of grain acquired through taxes declined over time in total grain procurement. The demand came from several sources. First, the urban population increased dramatically from 57.65 million in 1949, to 71.63 million in 1952, and to 99. 49 million in 1957. Second. since over 70% of <ports had been agricultural and processed agricultural products before the mid-1970s, the apacity to import capital goods for ind th of agricul riculture was the main source of raw materials for many industries, such as textiles and food For example, in 1956 the ion of grain for unusually hard labourers ranged between 22.5 and 27.5 kilograms (kg) wit al average of 25 kg: d labourers, it ranged betweer 17.5and22k d between 13 kg and 17 kg with ween 12 kg and 14.5 kg with a ational average of and high school it ranged between 13 kg and of 16 en,1982,p.206) c Royal Economic Society 2000
rural areas.8 Grain markets existed alongside the state grain distribution system. In 1953, the central government introduced a system of Uni®ed Procurement and Uni®ed Sale for grain and oil-bearing crops, which brought all grain procurement and distribution under its direct control, as a way to suppress food prices. Interprovincial grain trade by private traders was virtually eliminated. Accompanying the Uni®ed Procurement and Uni®ed Sale was a rigid household registration system, which deprived the rural population of the right to move to urban areas and thereby put the country-to-city migration under the government's tight control. The aim of these schemes was to extract as much agricultural surplus as possible to facilitate the heavy-industry-oriented development strategy that had resulted in an increased demand for grain and other agricultural products for urban food consumption and exports.9 Under Uni®ed Procurement and Uni®ed Sale, the central government set the target for purchase of grain nationwide before a production season began. The target depended on the planned urban consumption needs, urban reserves, industrial materials and international trade. The target ®ltered down through provinces and lower levels of government until it reached the basic production units and became mandatory quotas. The quotas speci®ed the quantity of compulsory deliveries as well as their prices set by the state. When quotas were ful®lled, peasants were free to sell the remaining surplus to the state procurement departments or at state-regulated grain markets. In practice, however, because the state often procured to the maximum possible extent, farmers were left with little surplus (Walker, 1984). After harvests, grain procurement agencies in each locality collected the quotas and delivered the grain to the state. The central government then distributed the grain to the urban population in each province at subsidised prices. To control urban food demand and to facilitate the distribution of food to targeted groups, food ration coupons were introduced in 1954 (Walker, 1984). In August 1955 the government established a more formal system and set up ration standards according to age, employment and other demographic characteristics.10 In subsequent years, the ration norms were adjusted, and the scope of rationing was extended to other agricultural products, including soy beans, coarse grains, cotton cloth, edible oil, and pork. 8 Agricultural taxes were used by the government as early as 1938 in the Shansi-Gansu-Ningxia liberated regions (Perkins, 1966). The rate was set at 12% of the `normal' yield in the early 1950s. The rate fell to 6% in 1970 and then to 5% in 1978 (Perkins and Yusuf, 1984). The share of grain acquired through taxes declined over time in total grain procurement. 9 The demand came from several sources. First, the urban population increased dramatically from 57.65 million in 1949, to 71.63 million in 1952, and to 99.49 million in 1957. Second, since over 70% of China's exports had been agricultural and processed agricultural products before the mid-1970s, the country's capacity to import capital goods for industrialisation depended on the growth of agriculture. Third, agriculture was the main source of raw materials for many industries, such as textiles and food processing. 10 For example, in 1956 the monthly ration of grain for unusually hard labourers ranged between 22.5 and 27.5 kilograms (kg) with a national average of 25 kg; for hard labourers, it ranged between 17.5 and 22 kg with a national average of 20; for light labourers, it ranged between 13 kg and 17 kg with a national average of 16 kg; for white collar employees, it ranged between 12 kg and 14.5 kg with a national average of 14 kg; and for college and high school students, it ranged between 13 kg and 16.5 kg with a national average of 16 kg (Chen, 1982, p. 206). 2000] 139 THE CHINESE FAMINE OF 1959±61 # Royal Economic Society 2000
140 THE ECONOMIC JOURNAL LJANUARY The urban consumption rations were matched closely with the e rural compu sory quotas. The former represented protected legal rights for city residents and the latter represented coercive burdens on the rural people. Under the procurement and ration system, there were serious conflicts between the government and the peasantry. Since the government gave priority to ind ial development, it pursued a heavy procurement policy to feed the expand- ing city population, to provide raw materials, to accumulate city grain stocks and to export grain for foreign exchange. However, more grain acquisition implied a greater extraction from agriculture, which unavoidably created strong opposition. Despite conflicts, the government was always successful in acquiring grain for cities, relying on effective administrative and political methods . A production unit's mandatory quota, specified prior to an agricultural season,generally depended on the production unit's normal outputs in previous years and its current consumption needs. In normal years, farm households would be left with enough food to meet subsistence needs. If the decline in grain output was a local phenomenon, the national or provincial government might reduce quota obligations or even deliver grain relief to the farm households in the areas with bad harvests. However if there was a severe reduction in food supply nationwide, rural people would endure most of the consequences, and a famine was likely to occur in rural areas because the government's predominant concern was urban food supply. Given the above institutional arrangements in China, local food output declines and the urban- biased grain distribution system could be the fundamental causes of the Chinese famine 14 The above discussions give useful hints for identifying proxies and bservations for analysing the relative importance of famine causes in the Chinese context. First, the entitlement was related to a household,'s legal status as urban or rural. The urban households were entitled to grain rations guaranteed by the state, whereas the rural households had the right only to the residual grain supply after fulfilling quota obligations. Second, the relative i Walker(1984)provided various accounts of rural opposition to the Unified Purchase and Unified ale schedule. Crimes were committed against the coercive acquisition and people who were sible for the crimes were sentenced, with penalties including imprisonment and even death. The bility caused by grain procurement caught the attention of Mao Tse-tung who expressed concerns his writings. Mao(1967) recorded: 'Old women blocked the road and would not allow the grain to taken away.'and.. At the time you(Minister of Agriculture) said there was no grain problem but i said there was 12 For instance, the formation of large-scale agricultural organisations enhanced the control adres over large quantities of grain. To achieve promotions, the cadres had incentives to trocurement policies. As noted by Perkins and Yusuf (1984, p. 4), the foremost feature of China development has been the gowernment's capacity to implement village-level programmes on a wide basis through bureaucratic and party channels. 1s Similar urban-biased food distributi rangements were also observed in fomer ocialist countries in Eastern Europe and former Soviet Union. 'In years of poor harvest even seeds for the next year and foodstuff for the farmers'own consumption were barely left in the village. ( Kornai, 1986, 1071-2) e an interesting contrast between India and China. He observed that China was more successful in eliminating malnutrition for the population while India had a better record in avoiding major famines. Sen attributed these observations to differences in political institution C Royal Economic Society 2000
The urban consumption rations were matched closely with the rural compulsory quotas. The former represented protected legal rights for city residents and the latter represented coercive burdens on the rural people. Under the procurement and ration system, there were serious con¯icts between the government and the peasantry. Since the government gave priority to industrial development, it pursued a heavy procurement policy to feed the expanding city population, to provide raw materials, to accumulate city grain stocks and to export grain for foreign exchange. However, more grain acquisition implied a greater extraction from agriculture, which unavoidably created strong opposition.11 Despite con¯icts, the government was always successful in acquiring grain for cities, relying on effective administrative and political methods.12 A production unit's mandatory quota, speci®ed prior to an agricultural season, generally depended on the production unit's normal outputs in previous years and its current consumption needs. In normal years, farm households would be left with enough food to meet subsistence needs. If the decline in grain output was a local phenomenon, the national or provincial government might reduce quota obligations or even deliver grain relief to the farm households in the areas with bad harvests. However, if there was a severe reduction in food supply nationwide, rural people would endure most of the consequences, and a famine was likely to occur in rural areas because the government's predominant concern was urban food supply.13 Given the above institutional arrangements in China, local food output declines and the urbanbiased grain distribution system could be the fundamental causes of the Chinese famine.14 The above discussions give useful hints for identifying proxies and units of observations for analysing the relative importance of famine causes in the Chinese context. First, the entitlement was related to a household's legal status as urban or rural. The urban households were entitled to grain rations guaranteed by the state, whereas the rural households had the right only to the residual grain supply after ful®lling quota obligations. Second, the relative 11 Walker (1984) provided various accounts of rural opposition to the Uni®ed Purchase and Uni®ed Sale schedule. Crimes were committed against the coercive acquisition and people who were responsible for the crimes were sentenced, with penalties including imprisonment and even death. The instability caused by grain procurement caught the attention of Mao Tse-tung who expressed concerns in his writings. Mao (1967) recorded: `Old women blocked the road and would not allow the grain to be taken away ...' and ` ... At the time you (Minister of Agriculture) said there was no grain problem but I said there was.' 12 For instance, the formation of large-scale agricultural organisations enhanced the control of rural cadres over large quantities of grain. To achieve promotions, the cadres had incentives to enforce procurement policies. As noted by Perkins and Yusuf (1984, p. 4), the foremost feature of China's rural development has been the government's capacity to implement village-level programmes on a nationwide basis through bureaucratic and party channels. 13 Similar urban-biased food distribution arrangements were also observed in former socialist countries in Eastern Europe and former Soviet Union. `In years of poor harvest even seeds for the next year and foodstuff for the farmers' own consumption were barely left in the village.' (Kornai, 1986, pp. 1071±2). 14 Sen (1983) made an interesting contrast between India and China. He observed that China was more successful in eliminating malnutrition for the population while India had a better record in avoiding major famines. Sen attributed these observations to differences in political institutions. 140 [ THE ECONOMIC JOURNAL JANUARY # Royal Economic Society 2000