Household grain storage decision in a transitory economy: Market liberalization and off‐farm employment

Abstract

Abstract The grain storage held by rural households, given its significant quantity and crucial role in household operations, plays a vital role in ensuring food security. This paper constructs a theoretical framework that encompasses household decisions regarding off‐farm employment, savings, and consumption, as well as the production, selling, and storage of grain. The theoretical model, driven by motivations of risk aversion and temporal price arbitrage, highlights the importance of market liberalization and off‐farm employment in shaping rural household grain storage decisions. Utilizing household‐level panel data from 2003 to 2020, we empirically validate that both market liberalization and off‐farm employment contribute to the reduction of household grain storage. However, these effects exhibit heterogeneity depending on the scale of household grain production and the specific crops cultivated. Significant impacts of market liberalization are observed among large‐scale producers who have greater exposure to the market. Furthermore, the storage of rice and corn decreases with an increase in off‐farm employment.