By Jikun Huang, Zhurong Huang, Huayong Zhi, Yunhua Wu, Xianfang Niu, Scott Rozelle

Given the mixture of findings from previous studies and our meso study in this project, the overall goal of this micro study (Module 3) is to look for more empirical evidence of market restructurings and to quantify their impacts on farmers based on an intensive farm primary survey of two major vegetables (cucumber and tomato) in China's largest vegetable production area; Shandong province. Specifically, this study is aimed to examine the following four sets of research questions and test the hypotheses related to each set of these questions:

i) Who are producing vegetables as the market expands? What are the major determinants of vegetable production? The major hypotheses to be tested are:
poor and small farmers are excluded from vegetable production; off farm employment has significantly affected vegetable production.

ii) What are the observed market restructurings in general? What are the observed marketing choices (e.g. restructured and traditional marketing channels) by farmers? The major hypothesis to be tested is: the changes in downstream of market chain have significantly penetrated into upstream, or farmer's marketing choices have experienced significant changes over time.

iii) What are the major determinants of farmers' marketing choices? Key hypotheses to be tested include: small and poor farmers are often excluded from the modern market chains; incentive, and marketing infrastructure have significant effects on farmers' marketing choices; institutions such as farmers' association facilitate farmers' participation in the modern marketing chains.

iv) What are the impacts of market restructurings or farmers' marketing choices on farmers' income, production, and technology choices? The major hypotheses to be tested include: there are significant impacts of farmers' marketing choices on their income (e.g. net income, return to family labour, return to capital), input use (e.g. labour and capital), and technology (e.g. ratio of capital and labour inputs).

The report is organized as follows. The next section synthesizes the major findings from our meso study. Section 3 discusses sampling method and data used in this study. Section 4 analyses crop production patterns and farmers' marketing choices with a specific focus on the selected two vegetables (cucumber and tomato). Section 5 explains methodologies, including the econometric models and estimation procedure. Section 6 discusses results of econometric estimation and hypotheses testing. The last section concludes the study.