THE 1987 INTERNATIONAL CONFERENCE OF THE SYSTEM DYNAMICS SOCITY. CHINA 795
A SYSTEM DYNAMICS MODEL AND. POLICY ANALYSIS
FOR RURAL SOCIO-ECONOMIC DEVELOPMENT
OF A PROVINCIAL LAKE AREA
Zhang Nai-guiang Hu Cheng-hong
Shanghai Jiao Tong University, China
ABSTRACT
This paper is based on the historical and current situation
of rural socio-economic development of a provincial lake area.
At present, economic development of the lake area is considerably
lag behind. Meanwhile ,there exist rich» natural resources and
hidden unemployment of rural population.By describing the several
facets of diffculty facing the lake area, the author addresses
the issue of adjusting industry structure of the entire lake
area, upon which the System Dynamics appreach is employed in
modeling and -policy analysis. ei
The System Dynamics Model of the lake area rural socio-economic
development consists. of 8 sub-models, which are farming, fishery,
animal husbandry, rural industry, forestry and side-occupatia
energy, water conservancy and population. By simulating and
analysing,policy recommendations are set... force.
Introduction
A provincial lake area in which the cultivative condition...is
considerably advantageous used to be flourishing in traditional
agriculture. But presently the economic development of the lake
area is in the face of difficult position. Recently the reform
of rural economic system in China has aroused the far
enthusiasm for farming, and the rural gross social product
lake area has been increased greatly. Because the st
irrational industry structure has been varied little,the momentum
of ‘increasing rural gross social product is being weaken. On the
other hand, there exist hidden unployment of rural population,
local deficit financing, water conservancy facilities in_ bad
repair,the shortage of funds for construction,undeveloped culture
and education. Meanwhile, there are 1.66 -million mu unexploited
equatic water area and 2.00 million mu unexploited grassy islet
by the lake.One word,the above-mentioned difficulties are almost
associated with the problem of irrational industry structure.
Therefore, the key to the economic development of the lake area,
in detail, is exploiting natural resources of the lake area for
developing animal husbandry and fishery, opening all avenues for
developing rural industry, and accomplishing the transform of
the . labor force from farming to fishery, animal husbandry and
rural industry, ect.
Because the modification of industry structure is comnected with
almost economic processes and multi-subsystem, among which there
796 THE 1987 INTERNATIONAL CONFERENCE OF THE SYSTEM DYNAMICS SOCITY. CHINA
exist multiplicate and complex relationships, it is very
difficult to study such complicated problem with the help of
quatitative analyses in a relatively long span of twenty years.
So we consider it is appropriate to study the problem using
System Dynamics approach.
Modeling
As.figure 1 shows, the System Dynamic Model of the lake area
consists of eight sub-models, which are farming, fishery, animal
husbandry, rural industry, forestry and side-occuption,energy,
water conservancy and population. First, there exists the problem
of rational investment ratio among there subsystems. Next there
exists the relationship of input-output in each subsystem of
economy. The profits derived “from the current year rural gross
social product are partly converted into accumulation, which are
added to the funds of investment from outside system, form the
input funds of the next year. Then we take into consideration
of the relationships among subsystems, The sub-model energy,
Population and water conservancy are considered as social capital
and manpower capital. for economic development. The effects to
the farming..output value from water conservancy are presented
by the multifliers of effective irrigation area and cultivated
land area by dykes. The economic growth will raises the demands
of energy and labor force,but the satisfied level of the supplies
will affect the policies for energy and labor force.. Energy
supplies most come from external system, the rest come from
internal system. The straws used for domestic fuels. will reduce
the amount of those returned to the cultivated land and affect
the output value.of farming.Meanwhile,the grasses on the lakeside
used for fuels will reduce the amount of those fed far
livestock. Moreover, the growth of population will affect the
level ‘of rural gross social product per capita. Between the
subsystem farming and fishery there exists, a relationship
w-o- the increase of cultivated land by enclosing the lake will
cut back the lake area,further affect the output value of fishery.
In order to construct.a model of economic system, at first, we
have to describe the mechanism of basic economic growth. figure 2
is a graphical presentation of Happd Domar model economic
Corstrcient of Unvedtnent, effect
Figure 2
THE 1987 INTERNATIONAL CONFERENCE OF THE SYSTEM DYNAMICS SOCITY. CHINA 797
|
ipa ead (<) @) (4°)
1
P
|
j te
7 Rural Animal | [Forestry an
Ushery Industry Husbandry) | Side-decupi
6) a0) Ga fas) (408) (3) red) (ih) (0 (HEP) (Ano)(AHLD) (AED ) (A0.) (ALD)
“) Te yy
Feguye 1
798 THE 1987 INTERNATIONAL CONFERENCE OF THE SYSTEM DYNAMICS SOCITY. CHINA
growth rate = investment rate * coefficient of investment effect.
There is no competitive substitution between labor force and
funds in the lake area because of the absolute surplus of the
supply of labor .force. Under this circumstances, the growth
mechanism is applicable for industry and agriculture. The growth
mechanism may be described as follows:the current year deposit is
transformed into investment, and the productive capacity is
increased ---- the next year total income is increased. This
income will promote more. deposit, investment capital formation
and more income. By simulating and analyzing, the following
issuses will be studied and policies recommendations will be
set force. :
* Dynamic pattern of industry structure which will bring about
overall and long term benefits
* Employment structure of labor force which corresponds to the
structure of industries. 3
* Conditions of capital and energy for maintaining structural
variation
* Appropriate population growth policy
* Rational proportion between the investment to water conservancy
and the investment to natural resource exploition and production
* The requirement for transportation, education, communication,
technology advancement, improving market environment
This model consists of 18 level variables, 25% variables and 373
equations. The time span of simulation is from 1980 to 2000.
Policy Analysis
in the model, the selection of policy options for the adjustment
of industry structure is implemented by changing the investment
structure to different sectors. Owing to the fact that conditions
of the lake area are complicated in the coming fifteen years.
Therefore, according to different conditions, we have designed
tens options by computer simulation. The following three options
are typical ones. For the three options, the common assumptioms
exists
i. The birth rate of women keeps the level of 1985,i.e. 3.94
babies
2. The final energy convertion rate keeps the level of 1985,
i.@, 14.08%
Table i is a table of comparison for investment structure
variation. For option 1, the investment ratio between different
industry sectors keeps unchanged from 1985 to 2000. For optian
2 and 3, fairly big changes oécur.
Table 2 is a comparison of industry structure variation for the
three options. It indicates that different investment structure
variation.
Fig.3 is the growth curve of rural gross social product for
THE 1987
INTERNATIONAL CONFERENCE OF THE SYSTEM DYNAMICS SOCITY. CHINA 799
Tima__| option | Faeming | Fishery | Industy | Aromat,
Option £ | 64,2086 2.838; 8.837 % | 20.4289
1986 Optim 2 | bG200% | 2.830% 6537 % | 2e.y3td
Option 3 | py.r00%f’ | 2.830% 8.83) %|_r0. vas,
4 Option t | $4,200 % 2.830% 8.837% | 20, y2F7|
1990 Option 2 | 43.0007 | 4.030% 1r.822%| 36. v259/|
Option 3 | arcooy | get | 23,3327] 26. virg|
Option 1 | byzo% | 2.830% 8.639% | 20.435%
49s Opti 2 | 29,000% | stoi | 28.6372] 36. vasgl
Option 3 | 20,007% | 42.0 36%/ 1.929%) 20, 25%
Option 1 | Go. 204 gar | 1¢.6374| 26, vrrg|
2000 Optim2 | is.000f | jsroze] | vi937%| >. vag
Options | freon | shozey | go. 000 Y | 20. myry
TABLE 1
Tune Option | Farming | Fistery | Rinnbiy feet
Optio) £4904 3.92% | 26.594, (3.94
198e optima | sw poo 39%) | 20sf%| 22.95%
Optima | sp 76% 2.9% | aco Z] iaped
Option | 45.40% 3237 37. F496
(99? Optim2 | 3.214 | Zerd | vayeg| 13.62
Options | 3, 6% | 2124 ob bob] 12. OY
Option | 3G se 4 2.92% essa (2.692 |
1990 Optima —_|_ 20.26%, 8.21% S294 22%
Orting | ies 6.92% §8. 279 URLS:
Option} 33,)29,, yeh | sepa so.sPh
2000 Optiena §— | 9.92 $.23% | 721d 20g
L Opttons | bepseh vp] 8hvyg b37%
TABLE 2
°800 THE 1987 INTERNATIONAL CONFERENCE OF THE SYSTEM DYNAMICS SOCITY. CHINA
option 1.In option 1, the output of Farming has a high percentage
in the rural gross social. product. Hence,natural disaster: has
serious impact upon the output of rural. social gross product,as
well as output of farmingy .In fig. 3, thé “considerable
fluctuation of gross output is a godd éxample. By the year
*:
s
ws te ’
c
co
iS
Wt
en 1985 ine 195
Figure 3
2,000 the rural gross social product is only 3.8 billion which is
3.094 times of that of the year 1980 , and the rural gross social
Product per capita is 524.55 yuan. At the same time,the
unemployment rate will reach 54.67%. In addition, the | natural
resource utilization ratio is very low for the lake area. After
the year 1984, no new development of ponds for fishery will be
exploited, and up to the year 2,000 only 500 thousand mu grassy
islet will be exploited, which corresponds a quarter of the
total grassy islet area.
Fig.4 shows the growth curve of the rural gross social product
for option 2, in which there is a big industry structure
variation. Therefore, the impact of natural disaster upon the
gross social product will be low. By the year 2.000 the rural
PJ
as
1908 1985 iw a
Figure 4
THE 1987 INTERNATIONAL CONFERENCE OF THE SYSTEM DYNAMICS SOCITY. CHINA 801
gross social product will be 11.377 billion yuan,which is 9.265
times of that of the year 1980. Furthermore, the employment rate
will reach 86%, and 2 million mu grassy islet will be exploited.
Fig.§ shows the growth curve ef the rural gress social product
for option 3. The industry structure variation for option 3
changes dramatically compared to option 2. The reason for this
big variation is that we-have made considerable adjustment of
investment ratio between farming and industry. By the year
288
156
188:
‘103
58:
cal
1988 1985 1998 1995 2008
Figure 5
the rural gross social product will reach 19.319 billion
wan which is 1 mes of that of the year 1980. Output per
-apita ‘will be 2 + Industry will dominate the lake
area, the output of which will be 81.49% of the total output.
The demand for labor force supply and employment structure will
be very high carresponding to the high speed growth of ecanomy
and industry structure variation.
The abové-mentioned three aptions are based on the idea that the
adjustment of industry structure will push cconamic grawth. The
The variation ef industry structure will lead ta economic. growth
and the utilization af natural resource. Meanwhile, corresponding
requirements for variation af employment structure, labor force
supply, energy policy, funds, ect. must pay special attention
resulting from industry structure variation.
, the model provides a vehicle for experimentation for the
isign makers of the local gavernment of the lake area in
’ socio-economic development plans and policies, The
options and analyses presented will be useful for the socio-
economic development of the hake area.
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