Zhide Jiang
College of Economics and Management, Northwest A&F University

The production process by farmers can be regarded as a joint production process which trees, fruit, grain and other commodities are produced with ecological results at the same time. In the perspective of joint production, the ecological compensation mechanism in the program of returning farmland to forest works as weak incentive, which means existing policies for returning farmland to forest have sufficient even extra incentive to encourage farmers’ action of participation, but lack of incentives or no incentives for farmers to management the vegetation of forest and grass. In this paper, based on the analysis of the existing internal mechanism barriers on the practice of returning farmland to forest project, we discuss the feasibility of joint production both to achieve ecological goal and economical production in agriculture. By analyzing the characteristics of farmers decision-making and motivate relationship under conditions of revealing ecological value of the ecological by-product, we build the ecological compensation mechanism framework and policy recommendations for coordinating ecological construction and agricultural production in future implement of returning farmland to forest project. Findings that: (1) Existing policy of returning farmland to forest shows ineffective incentive to farmers’ management efforts of retired land. (2)Turning ecological results of farmers production into a valuable form is technically feasible and costly acceptable for market transaction of ecological goods. (3)Under the model of eco-economical joint production (cash forest, for example) farmers can achieve maximum benefits through selecting their choice set from types of ecological products and economic products. (4) Under the model of eco-economical joint production government’s goal of ecological construction can be achieved through delivering the revealed price signals of ecological goods to the household decision-making, and then the incentive compatibility between government and the farmers can be realized effectively. (5) The direction of institutional innovation to improve and reform the current policy of returning farmland to forests is to create the agriculture eco-ecological compensation mechanism based on household decision-making to realize the pattern of eco-economical joint production.
Key words: joint production; returning farmland to forest; ecological compensation; institutional innovation